As indicated in my last weeks update nifty first corrected during the beginning of the week and then made a very smart recovery on the last two days of the week to take nifty above the 3200 levels and close above it. Nifty finally closed at 3211 a rise of 100 points from the last weeks close. This week close is the highest close of nifty after the month of October 2008 indicating the bulls have gained upper hand in the current scenario. So the strategy that should be adopted now is “buying on dips”. But 3240 has acted as a formidable resistance for the five to sixth months it attempted two times and failed during those attempts. But it closed above 3200 and also it is consistently staying above 100 day EMA for nearly one week implies that the bulls are stronger this time and I may not be surprised if 3240 is taken out during on week to 10 days. Currently 100 day EMA acts as a formidable support level (to this time it has acted as a support line) any breach of the same is not a good indication for bulls as bears will gain upper hand on breach of the same. Nifty is still in the raising channel indicating in my last week update the support for the raising channel is at 3100 and resistance is at 3300 levels. In the intra day charts nifty appears to be in an extremely over bought zone, this is being indicated by the technical indicators giving an indication that nifty might correct slightly during the beginning of the week and there after wage a attempt at the 200 day EMA which is placed around 3400. So any correction if that happens during the week should be taken as an opportunity to go long, till 3000 is violated.
I have indicated in my last weeks update that the sloping resistance level has to be broken to give strength to bulls and the first resistance level is broken and the second is placed at 3400 where also 200 day EMA is also present so the 3400 is going to be a formidable resistance level. Any breach of the same on upper side will be very good news to the ears of bulls as bulls will gain further strength and all the long term investors who invest on the basis of 200 day EMA who have been in sidelines till not will also come to the market which will fuel the further rise in the market.
Elliotte wave analysis:
As per my analysis of the wave pattern it appears that the five wave down wave pattern has been completed with 3rd elongated and the fifth failure. The fifty wave is a failure as it did not go below the low of the 3rd wave i.e 2225. The fifth wave failure suggests that there should be a strong counter trend and the fifth wave i.e “wave-E” should be retraced in half the amount of time required to form the same. It took 10 weeks for formation of the fifth wave and four weeks to go above it signifying that we might be in a strong counter trend in the market.
It may be noted that market started to fall from January and the current rise started from 2539 is from the middle of March, so it took nearly 13 months for the wave-1 of larger wave to complete. It may be noted that 13 is a Fibonacci and the current rise appears to be genuine as the low of the market was formed in after 13 months. So considering this it appears that we might be in the formation of wave-2 which has chances of lasting at least 3 to five months and will have a minimum target of 3406 and if it is violated the we have chances seeing 3984 and if it is taken out nest target comes to 4441.
Considering this it appears that this is time to made shopping as good quality stocks which have been at very attractive valuations should be bought as we might get at around 50% return on the same.
It may be noted that this holds good till market holds above the 100 day EMA if it is violated then we have to no other alternative but to short the market.
Directional Momentum index
As indicated in my last weeks update bulls have taken firm grip on the market. DMI has moved from 28 to 29.53 levels indicating that bulls have gained upper hand. +D1 line is above –D1 line and is still raising indicating that bulls are slowly and steadily coming into the market and taking control of the market.
Nifty Swing Trade:
As per two day swing trade currently it is in buy mode and the trend will reverse on move below the 2951 level (future). As per swing trade any move below 2951 will pave way for 2765 The points being discussed in the swing trade are that of the future.
Current trend - Buy
Reversal Value - 2765.
Individual stocks:
Bharat Forge- Rs.108/-
One of the leading player in forging industry has formed a very very bullish rounded bottom over a period of five to six months and appears to have just started to move up the rounded bottom signifies that worst may be over for the stock and the stock may be heading for higher targets in immediate target comes to around 150 and if take our none other that 250. The stock is looking strongest technically after September 2006. The stock has moved above the 100 day EMA and also the 20 day EMA has moved above the 50 day EMA and also DMI has crossed above 20 after a bullish crossover,signifying that bullish undertones are back in the stock and the higher targets are going to be achieved so appears to be a technically and fundamentally good stock. Stop loss Rs.90/-
Hind Dorr Oliver:Rs.40/-
HDOL one of the infrastructure developer has formed an excellent inverse heads and shoulders pattern signifying that worst may be over for the stock and the stock is expected to move up from current levels. The minimum target for H&S break out comes to around Rs.60 which is nearly 50% from the current levels. It may be noted that volumes are heavy over last one to two months indicating that some good amount of informed buying is going into the stock. So technically a good stock to buy at these levels. And also 20 day EMA has moved above the 50 day EMA signifying that the stock is going into the hands of bulls. The stock is looking strongest after the January 2008 fall.Stop loss Rs.35
Resistances: 3250/3400
Supports: 3100/3000/2850/2757/2525
M.Sri Mahidar
Sunday 5th-April-09, Time 6.00 PM IST
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