NIFTY Volume, Price and RSI Analysis

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The post I am writing today is based on price and volume analysis of Nifty and its comparison between 2011-2012 and 2015-2016 along with RSI analysis and its comparison for the same period.

The post which I am writing today is based on pure technical factors and nothing else.

The current rally from 6825 to 7600+ levels came with very low volumes which indicates that the participation is very low in the up move. In technical analysis whenever prices rises with along with rising volume brings lots of confidence in the rally and it gives more legs up.

Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move.

Read more: Volume Definition | Investopedia

Lets see the daily chart of Nifty of 2011-2012 period.

NIFTY_VOL_19-03-2016.png

In the above chart we can clearly see the trend of Price and Volume that prices moved down with higher volumes and prices moved up with lesser volume (marked with red lines), the same trend changed (mark with blue line) in which prices moved up with very strong volume and prices moved down with low volumes.

Now the above chart was of 2011-2012 period when in late 2011 to early 2012 we formed strong bottom in Indian markets and never seen back then, and the same trend (marked with blue lines) continued for very long time.

Lets have a look now at current scenario of Nifty.

NIFTY_VOL1_19-03-2016

If we see the above chart then it clearly shows the trend of Price and Volume which is that prices falling with higher volume and rising with lower volume. The last up move from 6825 to 7600+ came with lower volume as compare to late 2011 kind of move.

Now lets check the RSI movement in 2011-2012 period and it comparison with 2015-2016.

In the above weekly chart of Nifty and RSI I marked 3 green points then explanation on which given as below.

NIFTY_RSI_19-03-2016

  1. In this move Nifty made lower low along with RSI.
  2. In this move after making lower low at point 1 Nifty consolidated for few weeks and then hits almost same low (termed as double bottom) whereas RSI made higher low in the retest of low move, which triggered a 14% rally in Nifty and a false breakout in RSI.
  3. In this move Nifty broke double bottoms and made lower low below it, and here’s the catch RSI gave strong positive divergence by making much higher low as compared to Nifty.

Lets have a look at current scenario in Nifty and RSI.

NIFTY_RSI1_19-03-2016

In the above chart of weekly the points 1st and 2nd already done now are we going to see same kind of move like we saw in 2011-2012 period with 3rd point soon commencing??? Well what will happen I dont know whether we will 3rd or not only time will tell, but as of now this is the scenario of Nifty as compared to 2011-2012.

Note:- Whenever RSI gives strong positive divergences on weekly chart like it gave at point no.3 in 2011-2012 the bottom formed never get tested in the long run.

Happy weekend and Happy Holi in advance to all my readers.

Have a great trading year ahead.

All above charts are for educational purpose only and please do not consider it as a trade recommendation, also all above views are my personal and it may change from person to person.

Regards

Ameeth Vorra