INTERESTING NIFTY TREND ANALYSIS

The formation which I will display in this article is of extreme significance, and it has a prominent and a Direct Impact on the Nifty price trend. More fascinatingis the consistency of outcome of this candlestick pattern and the Nifty trend.

Marubozu Candlestick pattern:

The word Marubozu means "bald head" or "shaved head" in Japanese, and this is reflected in the candlestick's lack of wicks.

The basic criteria of the patterns include:

1. The single candle involved in the signal should have a long real body.

2. There must not be an upper or a lower wick (a.k.a., a shadow).

For example for a Bearish Marubuzo (OPEN and HIGH are nearly same, and LOW and CLOSE are same)

As you can see in the figure, there are many instances of a strong rally followed by a BEARISH MARUBOZU candlestick formation. However, rather than a ‘textbook’ definition of being a trend reversal, the candlestick here acts more on a retracement / mean reversion principle. After a steady uptrend the index rallies. All of a sudden the rally gets countered by formation of this ‘dreadful’ candlestick pattern. The concern here is that the index closes at the lowest point of the tick, which means the ending sentiment is extremely negative.

The key however, is what follows next after such a candlestick formation. In all the occasions which we can spot the next ‘tick’ has been closing positive, even after an intra ‘tick’ downside. In most of the cases, the trend, post Marubozu has reversed and index has managed to gain and cross its swing high pretty soon.

In such a scenario, we believe that if History does repeat / rhyme itself, then there is a strong case that Index has either formed (or in the coming week could form) a near term bottom. This also makes the Risk Reward to enter long positions substantially Lucrative for a trader.

Good Luck!

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