RETAIL RESEARCH 03 Dec 2016

HSL Crystal Ball
A technical forecasting of Nifty for the month of December 2016

Nagaraj Shetti
nagarajs.shetti@hdfcsec.com
Tel-022-30750021

RETAIL RESEARCH P age |1

which could mean further strengthening of downside momentum in the market. • Daily momentum oscillator like 14 period RSI has turned down and is now placed at the edge of the key support of 40 levels. which remains unfilled. which were all associated with the lower top reversal patterns (marked in X). the negative candlestick pattern of Thursday (dark cloud cover) and the sharp decline of Friday (formation of long range bear candle) are all pointing towards the formation of short term top reversal pattern in Nifty around 8250 levels (swing high of 1st Dec). The recent swing high of 8250 levels could now be considered as a formation of new lower top of this sequence. • We observe a formation of opening downside gap today. RETAIL RESEARCH P age |2 . Nifty slipped into sharp decline on Friday and closed the day lower by around 106 points. but Nifty was not able to sustain the recovery and shifted again into steep weakness towards the end. • Hence. RETAIL RESEARCH Nifty Daily timeframe: Observation: • Daily Timeframe: After showing a negative candlestick pattern of ‘dark cloud cover’ on Thursday. • Another possibility of daily RSI is opening up here. • The negative sequence of lower tops and bottoms as per larger degree is intact and it once again coming into scene now. Previously. Hence. This means Nifty has a possibility of forming lower lows (compared to its recent bottom of 7916 levels) and the daily RSI could sustain above its recent low (compared to the recent low of 22 levels of 21st Nov). present decline is expected to slip below the recent bottom of 7916 levels (21st Nov) in coming weeks. • Nifty opened Friday with negative note and slipped into further decline during early part of session. The smart upside recovery of afternoon brought some hopes for bulls to make a comeback. The overall momentum set up is now indicating a possibility of RSI breaking below 40 levels again. Nifty has formed few such unfilled opening downside gaps in past. which is a formation of larger positive divergence pattern in Nifty/RSI.

this setup is also hinting at the possibility of continuation of bear’s domination in the market in coming weeks. • A small body candle has been formed this week with long upper shadow. • Weekly 14 period RSI is now placed at the important lower levels of 40. the formation of this long legged doji type candle pattern is also pointing towards the lack of strength of bulls to sustain the gains/bounce back. which is also lower bullish range (bullish range-70- 40 levels). Hence. • Normally. a formation of doji pattern after a small upmove could be considered as a warning signal for bulls for resurgence of sharp weakness ahead. but was not able to sustain the gains towards the end. RETAIL RESEARCH Nifty weekly timeframe: Observation: • Weekly Timeframe: After the formation of important reversal pattern of ‘hammer’ of last week. which is echoing an emergence of steep selling interest from the higher levels. Nifty shifted into smart upside bounce back during early to mid-part of this week. • If the weekly RSI slips below 40 levels and sustains as per weekly closing basis. • Present weekly chart pattern is showing unusual strength of downside momentum (indicative of formation of long range bear candles on the declines) and the display of lack of strength during upmoves (formation of weak candles on the way up). then such action could mean increasing strength of downside momentum in the market as per smaller as well as larger timeframe. • Immediately after the formation of hammer pattern of last week. RETAIL RESEARCH P age |3 . • The present set up is suggesting a dominance of bears which normally participate after the completion of broader uptrend or after an important top reversal pattern.

RETAIL RESEARCH Nifty monthly timeframe: Nifty Monthly timeframe – CHART 1 Nifty Monthly timeframe – CHART-2 RETAIL RESEARCH P age |4 .

• The monthly 14 period RSI was not able to sustain above 60 levels during Sept and declined sharply in the last few months. This month saw follow-through weakness in the market till now. RETAIL RESEARCH Observation: • Nifty as per larger timeframe like monthly has witnessed a sharp weakness in the month of Nov. Nifty has the possibility of reaching down to the lower Bollinger band as per the theory of Bollinger band. • The theory of Bollinger band as per chart-2 is suggesting that the Nifty is now placed around mid Bollinger band at 8100 levels. Nifty has all the possibility of shifting again into the said negative sequence of lower highs and lower lows and this could consume a time period of another 3-5 months from here. • This expected pattern of monthly RSI could mean continuation of downside momentum and sustained weakness in the market for the next few months. As per the pattern and range theory of this momentum oscillator. we observe an unfolding of larger upward sloping triangle pattern (green converging trend lines) and the Nifty is now sliding down towards the lower end of this triangle pattern. the monthly RSI is expected to slide down to the key lower levels of 40 (from the current reading of 51). On the moving/sustaining below this support. • As per chart-1. before showing lower levels recovery during later part of last month. • Having declined from the top of 8968-Sept 16. The lower band is now placed around 7300 levels. Hence the present support of this moving average is placed around 7200 levels (levels could vary slightly in coming months). Month gone by – Nifty daily timeframe: RETAIL RESEARCH P age |5 . • According to chart-1.chart-1) as per monthly timeframes have been unfolded into larger declines as per negative structure of lower highs and lower lows and they have all consumed more than 10 months. Currently the lower end of this triangle is placed around 7500 levels in the next 1-2 months. • The important top reversal patterns (marked in X. the 60 month EMA (pink curvy line) has been offering strong supports for the market since 2012 onwards and leading to a formation of bottom reversal patterns of larger down trends around these EMA supports.

• Nifty could shift into negative structure as per larger timeframe like monthly and the ultimate bottom formation of this multi month down trend could possibly end around 7400-7300 levels in the next 3-5 months. Nifty is expected to reach down or just break below the recent bottom of around 7900 levels in the next couple of weeks and yet another upside bounce back is likely to occur from the expected lows. • The decent upside bounce back from the above mentioned bottom has occurred in the market and Nifty closed the Nov month near upper end of the recent upside bounce back. As per smaller timeframe. Summing Up . RETAIL RESEARCH • Nifty started the month of November with sharp weakness (blue vertical line) and the decline continued for next few sessions of early part of Nov month.Forecasting for coming months: • Nifty as per all the timeframe is in a weak set up and more weakness is likely to come ahead. • Minor attempt to show upside bounce back was made. but Nifty was not able to sustain the upside bounce and witnessed high drama of sharp selloff and steep recovery on the event of macro-economic news on 9th Nov. • The blood bath continued in the market for the next few sessions after the event during mid of November and Nifty formed a bottom around 7916 levels on 21st Nov. RETAIL RESEARCH P age |6 . around 8235 levels.

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