Weekly update for week ended 4th July 2009

Nifty during the week appears to be stuck between a close band 200 points 4249 to 4439. it appears that the market is moving in anticipation of budget. It appears that no body wants to take any side of the market which is clearly visible on very low volumes on the fridays last two hours rise. The less volumes are indicating towards lack of strength in the market and pointing towards probable down ward movement in the markets. Techncially also there are divergences in the osciallators indicating towards probable trend reversal in the comming days or weeks. The market is indicating probable trend reversal and has not reversed till now. The market appears to be undecisive now and we might see a decisive trend emerging in very near future. One point to be noted is that nifty has moved above the 15 day EMA after nearly two weeks indicating that the markets(bulls) are gaining strength and now the options is to go long on every fall. 15 day EMA is at 4355 and any move below that will trigger in a trend reversal towards down side and any move below 4355 we change or strategy towards shoring at every raise.

As far as techncially as concerned there are two alternatives developing.

Option-I
Heads and houlders pattern:

It can be seen from the chart that nifty appears to be clearly forming neards and shoulders pattern and Lest Shoulder(LS) and Head(H) appears to have compleated and we are in process of compleation of Right Shoulder(RS). Any break of the neck line which is at 4150 will indicate the the compleation of H&S pattern and also trend revesal and completion of the current up move and we might see the indices move towards the 3600-3700 levels. The minimum target in this case should be around 3750 levels. But any move above the high of the head will voilate this pattern .So any move above the 4649 will negate this theory and then we might be headed further upsides which is indicated in the option - II below.

Option -II

Continuation of the trend. As can be seen from the chart it apperas that the market has compleated the wave-A and has just compleated perfect flat with three waves a,b and c which is indicated by a circle in the above chart. Any break of the above trend line drawn from the march lows would indicated a probable compleate of the up move and also will negate this view. IF this pattern holds good and nifty move up to make a new high then we have all the fair chances of seeing a very very swift movement in the nifty in the comming days as if flat is compleated and the up move has just started then the up move should be very swift it should take the market patrticipants by surprise. so it appears that we can go long will stop loss at the trend line which is at around 4300 levels or at best stay away from the market till nifty makes a new high or goes below 4150.

Considering this it appears that nifty is at cross roads and will make a decisive move in comming days so till such time be cautious or stay away from the market.

Directional Momentum Index: DMI has moved down from around 55 levels to current 19 indicating that there is no trend or trend reversal is near. The +D1 i at 22 and -D1 is at 21 indicating close battel between bulls and bears and now bulls have a slight upper hand. The DMI is below the both indicating any movement on either side will be short lived or that we have chances of developing a trend in the comming days or week.

Turtle Trading - 20 day Phenominon
Current trend - Neutral
Go long above - 4693
Go short below - 4143.
any move below 4143 will confirm the Completion of H&S pattern.

M.Sri Mahidar
sunday 5th July 2007.
Trend is friend.