Ascending Triangle on NIFTY 50: An Upside Break Imminent to Start 2020?
NIFTY 50 is in the green in the first day of trading in 2020. India’s blue-chip stock index is currently trading close to 90 points from its 2019 close as 12,271.25 or 0.73% higher.
Gainers and Losers on the NIFTY 50
Tata Motors is leading today’s top performers as it is currently up 4.85%. In second is UltraTech Cem with a 4.24% uptick. Meanwhile, Tata Steel is in third with a 3.54% profit.
On the other hand, Eicher Motors is down by 2.11% as of this writing. The second-biggest loser is Bajaj Auto with a 0.96% loss. In third is BPCL which is down 0.89%.
PBOC Stimulates the Economy
Yesterday, the People’s Bank of China (PBOC) announced a 50-basis point cut in its Required Reserve Ratio (RRR). This is estimated to free up 800 billion CNY in the economy and reduce banking costs by up to 15 billion CNY in a year. Consequently, the news had a bullish effect on the NIFTY 50 because it suggests stronger economic growth in China. The country has become a significant driver of global economic growth and therefore, good news for the Asian giant is also seen as good news for its trading partners like India.
On the hourly chart, we can see that the stock index is re-testing its all-time highs around 12,280.00. It has also been making higher lows since late December. When you connect its most recent highs and lows, it actually forms what looks like an ascending triangle. In forex trading, this chart pattern is widely-interpreted as a bullish indicator. However, we’ll need to see a strong close above the resistance level. If there are enough buyers in the market to push NIFTY 50 above its record-highs at 12,293.90, we could see a bigger rally in the stock index.
On the other hand, a bearish close below today’s low at 12,198.20, would mean that support at the rising trend line will have already been broken and invalidate the set up. It could mean that sellers could be priming for a move to 12,123.55 when NIFTY 50 hit lows on December 26.