Here is the daily chart of NSE:NIFTY which has started showing some signs of weakness.
Firstly, you can see a head and shoulders at the top with neckline in blue. Neckline has been broken down. Head and shoulders (H&S) is a classic reversal pattern which is good at capturing tops and bottoms. This could be a short term top or possibly a bit longer term top but we’ll know more in the days to come.
To make the matters worse, you can see the 2 year long trendline (in red) in NIFTY has also broken down and re-test of the same seem to be in progress. Even in the weekly chart, last week’s close is below the trendline. So, we have two trendline failures which tells us that things are slowing down now and depending on global macros, things could get much worse.
Friday’s bounce might continue but it would likely remain the retest of either red or blue trendline. But if we close above both trendlines and the index sustains above them for couple of days then may be this is a false breakdown.
Keep an eye in the coming week to get more clarity.
As mentioned in the post, retest of blue line (H&S neckline) seem to be in progress now. We need to see if it remains a retest or price breaks out from here.