Nifty at 10,000... What's Next?

Apurva Sheth

The Nifty Index finally touched its long-awaited five figure milestone of 10,000 today.

The index closed above 9,000 for the first time in March 2017. From there, it has taken slightly more than four months to move up a thousand points.

Here's is an interesting chart of the Nifty published by India Index Services & Products Ltd (IISL), a subsidiary of NSE. It depicts the index's journey from its base value of 1,000 in November 1995 till date. Each bar depicts the time it took to achieve each thousand-point milestone in Nifty history.

Time Taken to Achieve 1,000 Level Milestones in Nifty
 Cutting Losses Short in Bosch

It took about nine years for the Nifty to double from its base value of 1,000. The index reached 2000 in December 2004. The journey to 6,000 was swift as it took less than three years to move up 4,000 points.

The move from 6,000 to 7,000 took a long time - six years and five months. The index then picked up momentum and touched 8,000 in September 2014 in less than four months.

The index could have hit 9,000 by March 2015 but couldn't quite close above that level and had to wait another two and a half years before finally closing above 9,000 in March 2017.

And now the index has crossed 10,000 in record time.

The chart gives a different perspective altogether of how the index moves over the years. You can see most thousand-point moves are clustered together and then followed by years of consolidation.

The index moved from 2,000 to 6,000 in three years. But the next thousand-point move took more than six years. The index has moved from 7,000 to 10,000 over the last three years.

The question on everybody's mind now is what's next? Will the Nifty sustain this momentum and gain another thousand points in quick succession? Or will it take time to consolidate these gains?

I am sure you want the index to move up quickly, but let's not get carried away with emotions. As traders, price action should be our only consideration as we answer this question.

I have been using price action for a long time to build views on the markets. I published an article with a bold view for Profit Hunter readers in April 2016. In Do the Charts Support a 70% Sensex Surge? , I called for a big upside in the markets over the next two to three years.

Mind you, this wasn't based on whims or fancies but solid research backed by price action.

I followed this up with an article published in Equitymaster's 5-Minute WrapUp in January this year: Here's Why We Are Bullish on the Nifty.

The Nifty has rallied one way since January and doesn't seem in a mood to stop soon. Let's have a look at this weekly Nifty chart and see where its headed next.

Nifty Achieves the Milestone of 10,000
 Cutting Losses Short in Bosch

The index bottomed out in December 2016 and began to recover from the lows. It has moved in a well-defined rising channel over the last six months. The upper edge of this channel acted as resistance between January to March 2017.

The minor dip in June also found support along the lower edge of this channel. According to the chart, the short to medium-term trend is intact as long as the index holds above the lower edge of this channel.

And how long will the channel hold?

That is anybody's guess. As a trader, you should always be keen to know what the market is doing right now. Not what you think it should be doing.

Reacting to what is happening in the markets helps us make money. Predicting what might happen doesn't.

And what's happening right now is providing a great environment for trading. Now, I'm the last person to say the markets will only move up. There will be corrections along the way...perhaps even deeper corrections than what we saw during Notebandi.

But the long-term trend is still intact, and I believe there is scope for a 70% upside in the markets from their February 2016 lows. That means the Nifty could move up to 12,000 levels over the next few months.

If it does, there will be lot of trading opportunities along the way. (I explain how I identified a recent trading opportunity in the Market Note below).

Now...are you prepared to grab these opportunities?

I realise you may be new to trading. Or perhaps you've burnt your fingers before. But that should not stop you from taking advantage of these opportunities.

That's why I am initiating an 87-day trading challenge. I am confident that anyone who takes up this challenge can become a Master Trader by October end. And I mean anyone - a professional, a businessman, a retiree...you!

If you understand these opportunities and are excited to take up my challenge, then watch out for this email: 'Apurva's 87-Day Trading Challenge: LIVE NOW!'

It's coming your way tomorrow at 10am.

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Market Notes

Why Traders Need to KISS More!

Okay, it's probably not what you are thinking...

KISS means Keep It Simple, Stupid.

You may have heard this saying before. It can be applied to almost everything in life. Including your trading business.

Trading stock markets is not an easy business. If you are a stock trader, you know how difficult it is to spot profitable trades. It takes years of experience. And even then you may still struggle, especially if you aren't using a proven trading strategy.

A strategy that works for you is essential to your trading business. Without one, you will go out of business. It's that simple!

Today, I will share a couple simple technical analysis tools that have been part of my strategy since I started tracking the markets. Then I'll run you through an example of how these tools have helped me generate double-digit returns.

Trendlines are the simplest of technical analysis tools and the starting point of technical analysis. A trendline is a straight line that connects two or more price points and then extends into the future from which the price may bounce back.

When a series of ascending bottoms - or higher lows in a stock - is connected by a straight line on the chart, the line it is called a 'rising trendline' or uptrend line. Conversely, a 'falling trendline' or downtrend line is one which is joined by a series of descending tops - or lower highs.

Up & Down Trendlines

Up & Down Trendlines


As a rule, we need at least two points to draw either of these trendlines on the chart. But the trendline is considered valid only when it has three touch points.

When the price approaches the trendline for a fourth or fifth time, it is an opportunity to place a trade.

When you draw a line parallel to the rising trendline by connecting successive tops, the combination of these two trendlines is called a 'trend channel' or 'rising channel'. And when we draw a parallel line to a falling trendline by connecting successive bottoms, we call it a 'falling channel'.

Rising And Falling Channel

Rising And Falling Channel

Trend channels are another valuable tool in the technician's toolbox. They are an important part of my trading strategy.

Like trendlines, trend channels also act as support and resistance going into the future. When the price approaches and bounces from these channel lines, it's an opportunity to place a trade.

Now let's see how these simple tools helped me generate a double digit return in Future Retail Ltd.

Trading with Trend Channel Lines
Trading with Trend Channel Lines

Future Retail Ltd had moved up almost four times from its December 2016 low of Rs 115.

It was trading smoothly in a rising channel since February 2017. It touched the upper edge of the channel in June 2017 and hit a high of 408. It then corrected to find support from the rising trendline. The stock consolidated for a while, finding resistance from 400 level. The rising trendline too consistently provided support as the stock consolidated.

On 13 July 2017, the stock ended above the 400 mark for the first time ever, breaking above its resistance with healthy volumes. The volumes during the preceding days were higher than average, indicating accumulation at higher levels.

All this indicated strength in the stock. So I sent out a recommendation to our subscribers on 13 July to buy the stock at or below 400 with a target of 10% and a stoploss of -5%.

The trade went live the very next day. The stock traded on a flattish note for five trading sessions. But on 21 July 2017, it rallied strongly to hit our target price of 440.

So you see these simple technical tools helped us generate a double-digits returns in just a few days.

Trendlines and trend channels are far from the only tools in the technical analyst's kit. Many other valuable, yet simple tools and techniques can generate even bigger returns.

I will be initiating an 87-day trading challenge tomorrow. If you take up this challenge, you can go from zero to trader in just months. You will add many more tools and techniques to your trading toolkit that can help you generate double digit returns. So stay tuned and watch out for my email tomorrow at 10 am.

From the Market Wizards...

"The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules." - Ed Seykota

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We request your view! Post a comment on "Nifty at 10,000... What's Next?". Click here!
2 Responses to "Nifty at 10,000... What's Next?"
vijay
05 Aug, 2017
Please don't show us your winning trades and build narrative. Let s know the avg. performance over the period of time if it is calculated in a transparent way. Thanks. Like 
CHITTA RANJAN ADHIKARY
01 Aug, 2017
12500Like 
We request your view! Post a comment on "Nifty at 10,000... What's Next?". Click here!