What The Charts Are Telling Us About 4 Key Indices
A picture is worth a thousand words, they say. While fundamentals undoubtedly determine the long-term prices of a financial asset, technical analysis (TA) can provide vital clues on where key indices are headed in the medium term. Personally, I've found a combination of Candlesticks, Bollinger Bands, stochastics and the trusty old Dow Theory to be a potent mix of technical indicators that can provide extremely vital clues on where any index is headed (investors are advised to exercise caution before investing/ trading based on any of these inferences, as no technical or fundamentals-based forecasting technique is fool proof and every financial security carries risks with it). For broad indices, I've found weekly charts to be the most effective. For more mercurial indices such as BTC/USD, daily charts seem to work better. Here's what the charts are telling us about four popular and important indices right now.
NIFTY - Bullish
The NIFTY has been in a firm bull market ever since it broke past the 8500-mark early last year. The trend appears intact, despite the post-budget jitters. The index found strong support at the middle Bollinger band, and stochastics are pointing to a momentum reversal too. It's likely that the bullish trend will continue for now, and the market will cross its previous high in a few weeks.
Bank NIFTY - Bullish
The Bank NIFTY has been in a powerful bull market since late 2016, when the throes of demonetisation had pushed it down temporarily to ~18,000 levels. Despite the steep post-budget fall in its value, the index has gained nearly 40% since then on a point to point basis; and looks all set to make a new high in a few weeks with a momentum reversal on the cards.
Bitcoin/USD - Bearish (Daily Charts)
Bitcoin underwent a massive breakdown last month, when it fell from its high of nearly 20,000 USD to below its 20-day moving average (DMA) of around 14,000 USD in a matter of days, and with high volumes to boot. A firmly bearish trend has been established since then, with the mercurial cryptocurrency making lower highs and lower lows in clearly defined waves. Even the recent rebounds have kept prices firmly below the 20 -DMA. Having rebounded to sub-6000 USD levels (intraday) to 8,600 USD as on date, the cryptocurrency looks all set to recommence its descent, with the current bearish wave likely to take it firmly below the 5500 USD mark on a closing basis.
DJIA - still bullish, but panic selling setting in
The DJIA (Dow Jones Industrial Average) has been in a long-term bull market all the way from the beginning of 2016 - since when it rose ~60% as of two weeks ago. The two red candles indicate early signs of panic selling (on high volumes, too), which sometimes may signify the start of a reversal (this is extremely difficult to predict, as acknowledged by Dow himself!). The index found some strong support at the 20-DMA mark though, which is a good sign. The next few weeks will be critical in terms of defining whether or not the DJIA continues its ascent or not. Although the bullish trend appears intact prima facie, the index will need to decisively cross its previous high before it can be confirmed.
