As I write this post, we are waiting for the Budget which is going to be presented coming week. It is a good time to look at the charts as yesterday was the weekly as well as monthly closing.
The past few days have been volatile as it happens before every budget but the difference we saw as that there was no pre-budget rally rather we got an pre-budget fall. Maybe be people were booking some profits before the budget as there is little hope for stellar budget looking at the finances of the Government. Any big announcement would be an surprise to most of us.
Moreover whatever we have heard from the people who matter is that there have been many packages during the Covid period so let us keep our fingers crossed.
One of the most important factor in technical analysis is that we should never listen to the news and never go by assumptions. We should always study the charts and act accordingly.
Another thing the traders can do is to stay out of the markets during the events and take a call after the event is over.
All said, let us look at what the charts say.
Above is an image of Nifty Weekly charts and let us look at a couple of interesting points.
At the right end of the chart, we see two small bodied candlesticks and one large red candle. Of these three candles, one is an spinning top (some can term it as evening star pattern too). followed by an large red candle. The bearish red engulfs the range or candles of past 6 (six) weeks.
If the above is not bearish enough, have a look at the MACD-Histogram in the chart. You will notice a clear divergence in the MACD-Histogram. Though the prices have moved up and made new highs, the MACD-Histogram has failed to do so.
The other important point is that if you draw a trendline on the weekly charts, the incline is too steep so the price needs to consolidate a bit if not correct from the current levels.
The monthly charts have formed an Shooting Star. Though a single candle does not give us any directions but we need to be cautious with our long trades.
The MACD line is also pointing downward in the weekly charts.
Below is the daily Nity Chart
Look at the above chart, you will notice the divergence in MACD lines, the MACD-Histogram and the price.
The MACD-Histogram also indicates that the downside is gaining momentum on daily charts.
Next week we will know about the Union Budget and market will be very volatile on budget day but most indications are suggesting that the markets are in the negative zone at present and we should not be taking long trades unless we get the confirmations on the charts.
Further one must note that there is an positive divergence between the MACD line, MACD-Histogram and the price.
Disclaimer: Please note that I am not giving any trade suggestions or trading calls. This is just a case study of the charts to the best of my knowledge and my analysis.