Investors in the Indian stock market rejoiced when the benchmark indices made lifetime highs. Sensex hit 50,000 and Nifty hit 15,000, but could not hold there.
As the prices began dropping, investors were in confusion whether the downfall is a retracement in an otherwise strong uptrend, or the beginning of the reversal of the trend.
At this point, it appeared technical analysis-wise
that both scenarios are equally likely.
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What happened next till the time of writing (January 4, 2021 around 2:32 pm IST) is as follows:
Then, the index had a Bull Elephant Bar bouncing from the zone of the 50 SMA which not only eliminated the previous day’s red candle but overshot the same to eliminate last two Bear Elephant Bars.
The next day was a gap-up opening, though the day’s high-low range was quite small as compared to the previous day.
The next two candles (including the one today) are green but small in size and seem to hitting the resistance at 15,000.
However, the recent high of the price action has been left behind. The importance of this action is based on the technical analysis principle of switching of the role of a support into a resistance once it’s broken, and vice-versa.
Thus, once the previous recent high was broken yesterday and today it is holding with a green candle above it leads to an estimation that the a bull rally has started.
Still, whatever may this analyst’s analysis of the market, every participant in the market has to make their own decision. Also, all information discussed on this topic on this website is for education purpose only.