Movement of nifty during the week is indicating some strength and also pointing towards further slight upward movement. The movement during the week has not completely negate the bearish sentiment in the market, it still holds good till the high of 3147 and 3240 are violated we have all chances of nifty making a new low. Movement of nifty in the coming week is going to be crucial as it will be encountering some crucial resistance levels which as per the current scenario appears to be difficult to break easily. As the last week being a derivative settlement the movement was mainly due to shifting of positions from Jan to Feb. One point to be noted is that the up movement of nifty was on low volumes even though it was the first day of the current month series. This indicates some down ward bias in the market. The movement of nifty has indicated that 2800 is going to be very crucial level for the nifty and any violation of the same opens gate for making a new low. Volumes have to pick up in the up moves otherwise it indicates weakness in the market. One point to be noted is that till nifty is above 2800 there is no problem for bulls.
Elliotte wave Analysis:
From last few weeks I have been indicating two alternatives in the patterns one being a triangle and the other being the flat. And I have said in my previous updates that Triangle pattern does not hold good as on date. But the movement of nifty during the week has again indicated that it still cannot be ruled out as nifty is now also forming higher bottoms and lower tops. The pattern is forming for the last three months and we may see a decisive break out from either of these patterns. I will discuss the Triangle Patter first and then Flat.
Triangle
It can be seen from the above chart that nifty might be forming a triangle over period of three months from end of October 2008 and it has completed three months and we have all chances of it completing it in the current month. As can be seen from the chart nifty appears to have completed four wave and we might be completing fifth and final wave. Generally the movement of market will be in the direction of wave-b and in this case wave-b is downwards so we have all chances of nifty breaking downwards after completion of the triangle. Wave-d of the triangle is from 3147 to 2661 a fall of 480 points and the wave-e should be at-least 50% of the same considering this wave-e should be of length 240 points from 2661 and target comes to 2901 and we are just near it a weekly close of nifty is around 2874 just fraction away from the level if 2901 is broken then we might see nifty raising another 50 points and after that we might see a very violent fall in the markets. So better watch out for the sudden chance in the direction of the market.
Flat
With regard to flat what ever is discussed in my last weeks update still holds good and no further elaboration is required in this case. One point I wish to point is that, in case of flat it appears that we might be complete wave-2 of the fifth wave and after completion of same we might see wave three. Generally wave-3 will be violent of all the waves and it results in major price erosion. So be prepared for the same.
Directional Momentum Index (DMI)
During the early part of the week we have seen the DMI raise above 20 and on Thursday and Friday DMI has slightly corrected to 18.83. But still we are in –ve break our as –D1 line is still above +D1 and –D1 is flat and +D1 and also DMI is moving down indicating that the up move is lacking strength at this point of time. Last week I have mentioned that after DMI moves above 20 we might nifty suddenly reversing and then we again suddenly see it moving in the direction of the break out which is currently down. So the coming week is going to give a very good indication for the future movement of the markets. So be prepared for sudden reversal of market.
Resistances: 2901/2950/3000/3147/3250
Supports: 2800/2661/2570/2503/2223
M.Sri Mahidar
1st February 2009 time 9.30 PM IST
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