MOVING AVERAGES HAVE BEEN PLAYING A MAJOR ROLE IN NIFTY
No doubt moving averages is a lagging indicator but now days being a technical analyst and looking thoroughly through each and every respective movement of the nifty and relating it with the previous patterns, I have come across a very striking game play which is going on between the moving averages and Nifty. Especially the 20 day moving averages has been playing a very major role in determining the future expected movement in Nifty during its course of initiating a golden cross over with 50 daily moving averages and 100 daily moving averages.
During the period commencing from 4th Feb; 2010, nifty crawled a lot around 4845 levels during the course of the golden cross over of 20dma with 50 DMA and 100 DMA. Nifty sputtered a lot around the 20 DMA before finally resuming its up movement in the later stages when the 20 DMA had finally completed the cross over with 50 and 100 day moving averages taking the support from 200dma when the nifty finally took the high of 5378 levels. There was a rebounce of about 11 percentage points.
Another resemblance of the previous pattern was witnessed on 8th June; 2010, where during the course of 20 DMA making a cross over with 50 and 100 DMA , the NIFTY INDEX levels trailed around 5083 levels and with the successful completion of the golden cross over with 50 and 100 DMA’S thereby retaining the support with 200 DMA, again made a rebounce and moved up till 5589 levels as on 6th sep;2010.This time the rebounce was of around 10% just a bit below of 11% retracement as the result of the golden cross over of 20dma with the other two moving averages. The nifty even continued its movement ahead after 6th Sep; 2010 to take the high of 6188 after one month as on 5th Oct; 2010. The basic similarity in the afore stated patterns was that, 20 DMA gave an upside cross over only after successfully making a cross over with 50 and 100 DMA and the same repetitive pattern was witnessed another time in June;2010 too.
Now in Dec; 2010, NIFTY still seems to have been strictly trailing at 20 DMA at 5900 levels stiffly playing between 20dma and 50dma between 5900 and 6000 levels. Like the previous patterns, by the time nifty breaks off the 50dma to the upside, the golden crossover of the 20dma with 50dma seems to be in the midway and no conformity would be ascertained. Still there can be the chances that the nifty may even break away the 100 DMA at 5800 level seeking support with 200 DMA( similar to the earlier laid down patterns). If it does so, then the repetitiveness of the earlier related patterns would be confirmed and the market after taking the support at 5600 may give an upside upside breakout followed by the golden cross over of the 20DMA with 50 DMA and 100DMA and may give a good rebounce by 10% in about the time period of a month getting back to 6216 levels again. But if it retains the support with 100dma at 5800 levels and gives an upside breakout from 50dma (above 6035 levels), then it may run up breaching off the 6500 levels in the later stages.

Note: the aforesaid analysis has been made solely on the basis of technical analysis and doesn’t take into account the global factors that may have its bearing on the markets.
BY SUDEEPAGARWAL