The curious case of Bearish Head and Shoulder Pattern on NIFTY 50

The curious case of Bearish Head and Shoulder Pattern on NIFTY 50

NIFTY 50 taking a pounding from the double Ds, the reason for a sleepless night for fund managers? Let's find out.

Demonetization and Dollar Strength: The surprise move of currency ban of Old Rs 500 and Rs 1000 notes has affected the Indian consumer to refrain from spending in the absence of adequate cash in the system, causing another year of disappointment of earning revival for fund managers it won’t be wrong to considered a strong reason to grow impatience for DIIs to throw in the towel.

FIIs the largest yet panicking shareholder group in India, the sell-off in the emerging market due to FED rate hike seemed like an excuse to run back to green back, shocked FIIs accelerated the withdrawal of funds and pulled the maximum amount from Indian Asset classes on concerns of India’s Consumption Economy slowdown.

The above events are very clearly visible on the Weekly Charts of NIFTY 50 showing markets are preparing for lower levels, The index has shaped up a prominent bearish technical pattern; head and shoulders with the critical neckline support near 7910-7920, In the event of maturity of pattern NIFTY, could crash down to Feb’16 lows of 6800-6900 which was tandem in the free fall of global market due to sudden Chinese Yuan Devaluation tantrum.

Look at NIFTY WEEKLY CHART below.

So, WHY exactly this is so crucial the correction of 10% from here and the fact the head and shoulders bearish patterns can’t change the fundamentals of India’s phenomenal growth potential story, some analyst might welcome it is a healthy correction in bull market, I could have agreed only if Charts were not showing a serious concern for markets. NIFTY monthly chart indicates a free fall below sub 7000 levels now will violate the 2009 onwards intact bull market trend, the multi-year this curious Head and Shoulders Bearish pattern needs to be cautiously played in the market if it breaks the crucial levels. We may see a long term trend reversal and hence a bear market.

So really will this actually materialise? I say we will find out.

NIFTY Monthly Chart.