What Stopped the recovery of Bank Nifty? (Educational Post)How to read a chart and make one is an art which one can master by practicing, understanding the patterns and applying logic in addition to reasoning. Today we will try to master this art with the help of below chart of Bank Nifty. Let us analyze it togther. After reading each paragraph try to look at the chart again for understanding it better. Look at the chart of Bank nifty above.
As you can see in the chart Bank Nifty is moving in a parallel channel like a canal since more than 1 year and 3 months or so. After making a high above 48.6K Bank Nifty formed a bottom near 44833 which was a 200 days EMA support, Bank Nifty consolidated and then started surging ahead. Now something happened on Wednesday which hampered the progress.
The progress was stopped by the trendline resistance indicated by the blue line. Facing the heat of the resistance Bank Nifty plunged down only to be supported by support zone between 46219 and 46418. This support zone as you can see in the chart consist ot bottoms and tops of few candles ranging from 4th December 2023 to 20th February 2024 and 50 days EMA which is currently at 46219. This can be the future support zone in case Nifty does not recover from this level.
Again after taking this support Nifty tried to surge ahead again but was again stopped by the same trend line which cam to effect on Wednesday. Start of this trend line can be seen on the candle of 16th January. This is how Technical analysis works.
Can we predict future of Bank Nifty with the help of this chart? Predicting future moves is always risky and is full of assumptions but what we can see here indicates that crossing the resistance zone of 47091 (Trendline resistance) and High of Wednesday 47352 will be a tough task for Bank Nifty. But if Bank Nifty crosses this zone the next levels/ resistances will be near 47670 or 47906. Crossing and closing above 47906 the Nifty can reach the next resistance levels of 48303 or 48595.
This is how you can analyse a chart. By applying logic you will gain experience. By applying experience and reasoning you will gain wisdom. Wisdom will help you in chartering your path through the maze of Wealth creation. Charts are nothing but mathematical representation of how investors/speculators behave at particular levels and in particular zones. With the help of charts you can understand paths, patterns and future and past directions of how markets/indices/stocks behave. If you become an expert by watching/drawing 100 charts every day, you can even predict future levels of markets/indices/stocks.
