One Pager Report on NIFTY forming Rising Wedge Pattern

India 50 (Nifty50) Sell @ 7980 Stop @ 8100 TGT 7200 – 6700 - 6070   

                India 50 (Nifty 50) since 2014 May has been trading in the side way to upside moving channel and making higher high and with five consecutive high and rising support have formed the Pattern formation of Rising Wedge pattern. This pattern is still in the formation stage and only break below 7700 will confirm the down trend. Though once can take a pre decisive move and enter at current price which is near 8000 and also at the rising trend line where it has always reverted from. Suppose this pattern holds true and market trade below 7700 in September by 2^nd week then we might look at the profit booking which might drag soon the market to minimum of 6660 as first support and then the level 1 target of 6070 on lower side. Height of the wedge from 7620 to 6660 is 960 points and break below 7700 will bring to support of 6740 as first support, Level I which I have taken a rise from 5990 to 7620, difference comes to 1630 points and break below 7700 target comes to 6070 as second support. Level II which I have taken from 5105 to the top of 7620 where the difference comes to 2515 points and break below 7700 bring to the target of 5185 which will be at the strongest support where value buying might comes in picture for enter in long term buying with support of 5100 was seen in August 2013.

1.        Prior Trend: In order to qualify as a reversal pattern, there must be a prior trend to reverse. The rising wedge usually forms over a 3-6 month period and can mark an intermediate or long-term trend reversal. Sometimes the current trend is totally contained within the rising wedge; other times the pattern will form after an extended advance.

2.        Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be higher than the previous high. Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be higher than the previous low.

3.        Contraction: The upper resistance line and lower support line converge as the pattern matures. The advances from the reaction lows (lower support line) become shorter and shorter, which makes the rallies unconvincing. This creates an upper resistance line that fails to keep pace with the slope of the lower support line and indicates a supply overhang as prices increase.

4.        Support Break: Bearish confirmation of the pattern does not come until the support line is broken in a convincing fashion. It is sometimes prudent to wait for a break of the previous reaction low. Once support is broken, there can sometimes be a reaction rally to test the newfound resistance level. Volume: Ideally, volume will decline as prices rise and the wedge evolves. An expansion of volume on the support line break can be taken as bearish confirmation.