GOLDEN CROSSOVER: AN EPIC INDICATOR ON NIFTY

We as analysts keep on searching for credible observations on markets every moment. And in due course of our search we dig deep into the unchartered pockets of market analysis. But with due course of the journey in markets the realization strikes that the crux of the understanding still lies in sticking to the basics. In today’s article I would present such a SIMPLE but POWERFUL analysis on Nifty.

My last article on Nifty, where I mentioned the “CONTRA BEHAVIOR” of MORUBOZU candlestick panned to perfection with an almost 1000 point rally captured so far.

I believe that today’s observation holds a similar importance on the medium term trend on the Nifty.


GOLDEN CROSSOVER:

On the daily charts the event of a short term average (50 DMA) crossing above the long term average (200 DMA) is termed as Golden Crossover. This is of extreme significance for the trend analysis of Nifty. In the week gone by, the Nifty has managed to give such a STRONG GOLDEN CROSSOVER.
The current charts for Nifty indicate such a Moving average breakout pattern: See chart below

There are few points to consider for this analysis though:

1. The steep slope of the rising 50 DMA, this indicates the ferocity of the price uptrend. In many cases prices do not even retrace back to 50 DMA and start to surge up yet again.

2. The reversal of a Bearish Crossover with a Golden crossover in a very short period of time. This again is very significant. We are talking of longer term trends, which influence or are influenced by change in sentiments. If the long term sentiments change in a short span of time, it creates gigantic proportions of price trends. The most recent examples include post Demonitastion breakout, and the post 2009 major low breakout. In both the major instances indices not just reversed their trend into a rally but they went into an altogether different altitude.

3. The high success ratio of this phenomenon of Golden Crossover w.r.t Nifty.


Now look at the historical comparisions of such an event in the last 2 decades of Nifty price trends.


The tricky part however, is how the indices behave immediately on this event of Golden Crossover. Sometimes they go through a Major price retracement, sometimes marginal, and sometimes no Pullback as such, and price uptrend ferocity continues.

CONCLUSION:

The event is extremely powerful in the medium to long term trend. On an average the uptrend continues for almost 3-6 months post the Golden Crossover. The beauty lies in the fact that, on an average the NIFTY has rallied by almost 8-10% in a span of 3-6 months post this crossover.

Remember,

“Good things happen by going Contrarian, Great things happen by riding Trends, and surviving them”

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