The performance of nifty during the week is nothing but spectacular considering the state in which the nifty was at the end of last week technically. Nifty opened with gap up and continued to move up every day of the week indicating some strength in the market. One of the remarkable feature of the up move during the is that nifty was able to move up and close above it high of 4731 at 4732 which is very very powerful bull strength. But there is one big draw back nifty is moving up with heavy –ve divergence in oscillators indicating that the up move may be strong but the under tone is weak and when the market reverses it would be in a big way. There is –ve divergence in daily and weekly RSI, ROC clearly indicating that the market lacks strength and might reverse any movement. One of the markeble feature of weak market presently is that the DMI which shows the direction has strength or not is still moving down even though market has made a new high indicating that the movement lacks directional strength. The market is still above the 15 day EMA giving an indicating that we should go long on every fall. The 15 day EMA is at 4586 so till the market moved below this the trend is up and if it moves down the 15 day EMA then the trend becomes down and we should reverse the strategy of going short on every raise. The market has been finding support at the 50 day EMA and reversing from there to make a new high during the last two months, the 50 day EMA is at 4430 any movement of nifty below 4430 will confirm the strength of the bears and fall of the market will intensify on movement of nifty below 4430.
It can be clearly seen in the chart above that there is huge –ve divergence in the oscillators three power oscillators i.e. MACD, ROC, RSI giving a clear indication that the undertone of the market is very weak. This gives a clear indication the our longs should be strightly protected or we should start booking profits on every raise.
It can be seen from the above chart that nifty is in a trend from last six months and that the trend line for the same is drawn from the low of 2600 to last weeks high so the current support is at around 4500 levels the trend line was not broken till now and any breach of 4500 will not augur well for the bulls as bears will take center stage from that level onwards. So any breach of 4500 will be a significant event to watch out for nifty in the coming weeks.
Directional Momentum Index:
DMI is has moved from 15.19 to 13.62 has just given a sell singal i.e. +D has moved above -D. The downward movement of DMI is a clear indication of lack of direction. Wait for the DMI to move above 20 to give an trending indication. So keep a close watch on DMI as it is expected to give a clear indication of direction in coming weeks. On weekly chart the DMI is in buy mode and is moving down indicating the bulls are loosing ground. Even though +D line is above –D line the distance between the same is narrowing indicating that bulls are losing ground.
Pivot Point Trading Strategy:
Pivot has worked very well last week where in nifty is moved above the R2 indicating strength for the week. For the coming week the pivot is at 4670 any break of the same will pave way for 4598 and 4463. So for the coming week the nifty range should be any where between 4463 and 4805.
Turtle Trading:
Turtle Trading - 20 day Phenomenon
Current trend – buy (but my view is to go neutral)
Go long above - 4731
Square off - 4353
Go short below: 4353
ATR at 123
M.Sri Mahidar
Sunday 30th August 2009 Time 8:33:31 PM IST.
Trend is friend.
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