Nifty opened very very strongly on Monday and successfully closed above 3517 its resistance level for last two weeks and went on to cross 3600 and stayed above it for rest of the week. It went on to make a high of 3717 and there after slightly corrected and now place at around 3620. Nifty all through the week stayed above 3600 and except during the opening trade it quoted below 3600 and during the rest of the week it made its low around 2620 levels. It appears that nifty has tired of raising and giving signs of weakness at-least for very short term. All the technical oscillators like ROC, RSI, CCI, and Momentum are showing a –ve divergence indicating that market is raising but lacks strength. So we can expect some amount of correction in the coming week or two. Longs may be initiated only on close above 3717. If nifty moves below 3600 we have chance of seeing nifty at 3400 its 200 day EMA. Nifty sustaining above 200 day EMA for the last one week to 10 days is an indication that bulls are holding on but the –ve divergence in oscillators indicating that they might have tired and need a rest before they go on to make a new high. Any up move and a new high from current level will be dangerous for the market as we might see a far bigger correction after the rise. In my view its better for the market to correct and then make an attempt for a new monthly high. But we never know what market has in-store for us. Nifty has completed 9 weeks of continues rise and 9 is above 8 so we can see nifty making a montly high at-least by 13th week. So we might see nifty raising for the next four weeks. Don’t be carried away it implies that by 13th week nifty has all the possible chances of closing above 3717 with intermediate corrections. As per Fibonacci the trend should be up at-least for next four weeks means at-least till the end of may. There are some instances where market have corrected in the 11th week or so. But there are fair chances that by 13th week nifty has chances of making a new monthly high.
It can be seen from the above chart that market is moving in a channel for the last 9 weeks any break of the channel has chances of seeing a bigger correction than what is seen in the last nine weeks. The first support line is at 3600 and the second one is at 3550 so any move below 3550 has chances of taking nifty towards that 200 day EMA. If the trend line is not broken in one week or so we have chances of nifty moving towards the resistance line which appears to be at around 3850 levels.
Directional Momentum index
As indicated in my last weeks update bulls have taken firm grip on the market. DMI has moved from 39 to 42 levels indicating that bulls are still holding upper hand... As the DMI has moved above 40 we can see a huge volatility in the market with upward bias in the market.
Turtle Trading: - 20 days phenomenon;
Current Indication – buy Generated at 2850
Longs may be closed on movement below – 3311
Shorts may be initiated on close below 3149
ATR is at 110.
Individual stocks:
Jammu and Kashmir bank Rs.356
This is one of the fundamentally good, sound bank which has given a very good technical reversal indication. It has formed a reverse heads and shoulders pattern and the break our above the neckline has happened when it closed above Rs.350 and that too with volumes. This appears to be perfect technical reversal pattern. The minimum level of the break out should be at around Rs.140 from break out so the minimum target should be 490-500 a 50% return from the current level. Stop loss:300/-
M.Sri Mahidar
Sunday 10th May 2009 9.00 PM IST
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