The performance of the nifty during the week was nothing but spectacular. It moved up more that what was expected and as usual surprised every body. Nifty opened on a weak note moved further down towards 3900 made a low of 3918 and there after made a spectacular recovery and closed at a nearly weekly high at 4374. Nifty virtually recovered the last week entire loss giving an indication that bulls has made a smart fight back after loosing to bears a week previous. One point to be noted that during the week at 4196 nifty moved above the 15 day EMA indicating that bulls have gained upper hand and the current option is to go long on every fall till nifty moved below 4219.
Last week it has been indicated that nifty has started to form lower high and lower low after nearly three to four months indicating that weakness has set in and market has to go above the latest low to indicate some strength. The latest high is at 4479 nifty has to move above this point comfortably and close above it to indicate strength and also negate the theory of lower high with higher high and strength for bulls. So keep our fingers crossed.
It may be noted that I have gone through the technicals of major stocks which constitute nifty and even though the stocks have rise during the week the rise is not giving any comfort. The individual stocks are not indicating that much as has been indicated by nifty. This is one of the very rare things where in the stocks are showing –ve divergence to that of nifty which is not a good indication and is clearly giving an indication we may be in for a surprise. Some how it is not giving comfort to me. So my theory is that when in doubt stay out even though we have to go with the trend.
H&S pattern whether negated?
Another point to be noted that I have indicated that we have confirmed heads and shoulders and we might head down wards but the heads and shoulders confirmation has not achieved the minimum objective target which is around 550 points from neck line which is at around 4150-4200 so the minimum objective comes to around 3600-3650 so till not it has not been achieved. Whether is will be achieved or not we have to wait and see. Currently nifty has successfully moved above the neck line during the current week and is staying above it. If the minimum objective has been achieved then we can be sure that the pattern implications are over but currently this is not the case. So when will the H&S pattern implications negated? Generally the H&S pattern implications are negated when the high lf the right shoulder is taken out. So in the current case it is the 4479 which has to be successfully conquered to negate the H&S pattern implication. Generally the failure of H&S patterns are very rare and cannot be ruled out. We have to wait and see whether the rarity will happen or not. One of the important note which has to be looked into is that as per technical analysis even if the H&S pattern is negated it clearly gives an indication that the end in near the corner.
Elliotte Wave Analysis:
Now we will see what is elliotte is pointing towards? We have entered into 5th month of the rise from 13th March and also completed 19 weeks of rise (not a continues rise). 5 is a fibonacci and new Fibonacci on weekly basis is 21 so as per weekly basis we have two weeks left and we are into fibonacci month of 5 so both have to be closely watched. So trade or invest accordingly.
As per elliotte wave it appears that we have completed wave A and we are into formation of wave B which appears to be forming a flat. Flat consists of three waves 1,2&3 and it appears that we might have completed wave 1 and might be forming wave 2 after which wave 3 should commence. So what should be the length of wave 2. Generally it would be more that the 61.8% of the wave-1 which comes to a minimum target of 3400 for nifty and we are just near this if flat is forming then I have not doubt that nifty will move past 3400 atleast for short time. If 3400 is taken out the target comes to 4541. As per theory all the three wave would be of equal size but it does not happen. If 4541 is taken out then we have all chances of seeing 4697. So wait and watch.
Directional Momentum Index: DMI has moved from around 19 levels to current 18.54 indicating that even though the market is moving up it is not trending and lacks strength indicated by downward movement of DMI. +D1 is at 28 and –D1 is at 23 indicating that bulls are having upper hand and indicating lack of strength as DMI is below 20 and is moving down.
Turtle Trading - 20 day Phenomenon
Current trend – Down 9 (Generated at 4143 on Monday)
Go long above - 4480
Square off - 4480.
ATR at 134
How ATR is to be used? – if you have take a long positions you have to add another position at 2 ATR with a stop loss at the 2ATR – ATR for all the open positions/ acquisitions.
Pivot Point Trading
As per pivot the current week resistance is at 4376 and if take out we have chances of seeing 4608 and on weekly basis the resistance is at 4537 if nifty fails to move near this then it has all the chances of reverting towards weekly pivot of 4227.
M.Sri Mahidar
Sunday 19th July 2009 Time 8.19 PM IST.
Trend is friend.
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