India50: Bottom of Bullish Channel Acting as Resistance as Index Tries to Regain Entry After Recent Drop
The daily candle chart below shows the price history of India50 over the medium term. This Contract for Difference (CFD) index aims to track the underlying price of the CNX Nifty broad market index in India. Earlier this Thursday in Asia - India50 last traded around 8681.0, following a quiet session compared to the volatility of the last few days (and recent weeks).
Since the last post about India50 in Ideas You Can Trade in the beginning of March, a pullback developed after 9100.0 was pierced and that pullback brought prices towards 8350.0 near the March 27th low before that drop was reversed. The bounce that since followed had yesterday reached around the bullish support line of the medium term trend (see lower green line on chart below) and which could act as resistance to the channel being regained.
While today's price action was within a narrow trading range, India50 did move higher but only slightly, thus indicating that a breakout or reversal could follow from around this support line as it still is yet to be determined with regards to the trend direction (whether the channel will be regained again or lost).
Therefore, if a higher-high follows the bullish recovery should continue, whereas a failure to hold above the lower support line of the bullish channel would signal a bearish reversal (of the recovery) and bring India50 back towards yesterday's low with further support near last week's low. Nonetheless, the momentum since March 27th - over the very short term - is bullish.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 8705.0 with a Limit to take profit @ 8807.0 and a stop-loss @ 8610.0 Risk/Reward Summary: Limit risk = 102.0 Profit / (-95.0) stop-loss risk = Gain to Loss ratio = 1.07
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 8646.0 with a Limit to take profit @ 8509.0 and a stop-loss @ 8760.0 Risk/Reward Summary: Limit risk = 137.0 profit / (-114.0) Stop-loss risk = Gain to Loss Ratio = 1.20
Medium Term Daily Candle Chart: