Nifty: Pattern, MACD, Rate of Change Indicator All In One

Nifty Expanding Pattern is a classic technical analysis pattern that results into breaking of previous highs or lows without any meaningful trend. This is the reason why even after breaking important support or resistance prices are not moving in any direction.

Let us see on Nifty 2 Hourly chart this pattern along with different indicators:

Nifty 2 Hours chart:

Analysis: During sideways movement it is important to see the oscillator or indicators that can provide reversal areas. We can see that prices are breaking the important supports or resistance but the indicator is still providing reversal clues. We are showing two indicators below the price plot – MACD and ROC. The period of an indicator should be selected on basis of the cycle that it follows. However, over here for understanding purpose we are not tweaking the parameters

MACD, Indicator clearly shows a contracting behaviour where the indicator itself is forming a contracting triangle pattern despite of prices forming expanding pattern. A breakout on the indicator along with price confirmation will increase the conviction that the trend in the direction of breakout has started.

Rate of Change indicator: This indicator shows classic movement between the overbought and oversold region or rather both extreme levels. The upper end of the range is near 1.3890 and the lower end is at -1.6103. One can look forward for buying opportunity near the oversold state and selling opportunity near the overbought state. This strategy has to be confirmed along with the Price pattern or CandleStick formation as well as it is the prices that we are trading and not the indicators. This will save a lot of traders from falling into the pitfall of giving more importance to indicators over prices. Highlighted green and red region on the chart is an Ichimoku Indicator and we will revisit this in subsequent research.

In a nutshell, we can clearly see that by applying these simple methods of Indicators along with prices one can take trades effectively.

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