As indicated nifty has started the down move on the budget day. This was written on the wall as all the technical indicators were indicating that the end is near and the budget was the only reason where in the bears has come into the market in a big way. It appears that the bears may dominate the market for one to two months during that time the nifty is going to test its pre-election result levels and it appears that nifty might be on its way to around 3500 levels. During this week nifty has decisively broken the 15 day EMA after nearly three months ( note three is a Fibonacci) and is just moving down from there clearly indicating that the trend is down and now in the current scenario we should be seeing for shorting opportunity, i.e short on every raise. The 15 day EMA is at around 4200 levels. Till 4200 is taken out its short on every raise. Last week in have indicating clearly that any move below 4355 should be taken as an opportunity to short and any one who has shorted on the same would have made a killing in the market. It may also be noted that RSI has gone below the 50 levels also for the first time after three months and also nifty has moved below 50 day EMA clearly indicating that bears have taken upper hand and further down sides are not ruled out. Next support for nifty is around 100 day EMA which is at around 3850 levels.
It can be clearly seen from the chart above that from middle of march onwards the market is making Higher Highs(HH) and Higher Lows(HL) and two week before it made Lower High( LH) and last week it made Lower Low(LL). The formation of lower high two weeks before was the first indication that the bulls are becoming weak and the formation of Lower low during the week has confirmed the same. So till higher low is made the market is going to do down. So watch out for the higher low formation in the charts to see first signs of reversal.
Technically as has been indicated nifty has successfully broken below the neck line of the Heads and shoulders pattern indicating clearly that nifty might have formed a intermediate top at-least for the time being and we would be seeing the larger correction than that seen in the last three months. Nifty might be correcting the rise from 2539 to 4693. Considering this the minimum correction would be around 820 points from 4693 the target comes to 3872 and if it is broken the next target would be 3616 and if it is broken then we have target of 3361. so do closely watch for those levels.
Last week nifty has broken the neck line as has been indicated in the above chart. This is only the first break and the peculiar feature of the H&S pattern is that after the break of the neck line it moved down then moves up towards or near the neck line and then fall like nine pins. The second fall will be more viscous than the first one. So currently we have chances of seeing nifty moving towards 4150-4200 levels where in the neck line is there and then will fall on heavy volumes. This is being confirmed by the volumes. The fall during the last week on the day of break was on higher volumes and there after low volumes now nifty has all chances of moving towards 4200 and then will fall on very very heavy volumes.
Directional Momentum Index:
DMI has moved from around 19 levels to current 20.50 indicating that there is trend reversal and also the up move above 20 is followed by the –ve movement i.e movement of –D1 line above the +D1 levels confirming the bear move. The movement of DMI above 20 after bearish movement of D1 lines indicating that the down move is gaining momentum and we have all the chances of seeing the market moving further down.
Turtle Trading - 20 day Phenomenon
Current trend – Down 9 (Generated at 4143 on Monday)
Go long above - 4601
Square off - 4480.
Add further on move below 3976
ATR at 136
How ATR is to be used? – On every fall of nifty by 136 points further positions should be added.
M.Sri Mahidar
Sunday 12th July 2009.
Trend is friend.
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