Nifty and ADX ( Directional Movement Index)

 

 

Confused in Nifty Direction. Here is a Indicator which denotes in which direction we are going to move. Befor talking

about the Index Direction let us have a overlook about the Indicator

 

 

ADX fluctuates between 0 and 100. Readings below 20 indicate a weak trend or ranging market and readings above 40 indicate a strong trend. ADX does not indicate direction but rather just the strength of the trend, up or down. Often plotted with ADX are two lines that indicate direction. The lines are +DI and -DI. If the +DI line is above the -DI line, then the trend is considered bullish. Crosses of the +DI and -DI lines generate buy and sell signals. For example, if +DI crosses above -DI, then a buy signalis generated.And if -DI crosses above +DI then a sell signal is generated.

 

If you see the last three month charts as shown it is witnessed than on May 20th,2008 the selling signal is generated because -DI (Red line) crosses above  +DI(Blue line). As said above the ADX denote the strength of the trend till from March 20th ADX value is continiously increasing and more stronger the ADX value more stronger the Trend. So one can come up with a conclusion that the Negative trend is getting stronger. There is a chance of putting an end to the trend as the -DI and +DI lines are trying to converge.If both the line(+DI and -DI) try to converge this is a great Buying Siganal at this time. If they try to converge then this selling will be end in two or three days. 50% of chance that we are not to break 4400. But recent OIL surege upto 139$/Barrel and almost 400pts down in Dow suggest that we are defenitely going to open gap down on monday.