For our subscribers I’ve discussed what we need to be seeing in terms of market breadth before stepping in and trading stocks in India on the long side (here, here, here, and here) and today’s action suggests we may be on our way to getting that opportunity in the next week or two.
Last week the Nifty 500 tested support as momentum got oversold, prices began to bounce, and now we’re seeing a bearish engulfing candle at former support. If there’s downside follow-through tomorrow, that would suggest that prices are headed back toward last week’s lows.
Click on chart to enlarge view.
From our perspective this move lower would actually be constructive for market bulls if we see prices make new marginal lows with both momentum (RSI) and breadth diverging positively. We would need confirmation of this failed breakdown by prices getting back above the first low, but that’s certainly what we’re looking for.
Throughout history we’ve seen hundreds of examples of this type of development across markets, so we’re going to continue to use this as our roadmap until the market suggests otherwise.
Thanks for reading and please let us know if you have any questions.
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