Nifty surprised every body on Monday as it opened with gap up and continued to move up whole week. The movement of nifty on Monday was nothing but surprise as it broke past the 4700 barrier and continues to move above and was successful in close above 4800 levels. This is clearly giving an indication that bulls have gained upper hand. One point which is worrisome even now is that the break out day on Monday the volumes were not high and on subsequent day the volumes were high. This giving a clear indicating that the break out lacks strength. But what ever may be the case our motto is “Trend is Friend” just stick to the trend till it reverses. In the current scenario 4700 becomes an important support level and we can be long till the 4700 is violated. It appears that nifty has broken out of a triangle formation over a period of last three months and has just broken out of it. But the break above is not on very heavy volumes giving an indication that nifty will be struggling to move up unless the volumes increase substantially on every raise.
One point which we might note is that nifty has been rising from 13th of March and we have completed six months. And nifty has made a new high in the 6th month; clearly giving an indication that nifty might be rising till its next Fibonacci number i.e. 8 so nifty has very high probability of raising till it completes 8 months from march. If this theory has to prove right we might see nifty raising till 13th of November 2009. So we should see nifty inching up till that time. I have been following this technique for last five years and it has proved itself right in majority of the times.
Another point which we have to note is that DMI which shows the strength of bulls or bears has moved up from around 11 levels to 17 levels after giving a cross over in favor of bulls. So it clearly giving an indication that bulls are gaining upper hand and further upsides are not ruled out. So bears be careful.
One of the very very important event which has to be watched in the coming week is whether nifty would be able to break above the important Fibonacci resistance level. Move above the 61.8% resistance level of the entire fall from 6357. The wave started at 6357 January 2008 high and the wave ended in March 2009 at a low of 2539(even though the low was 2225 in October) the end of the wave structure is important. So the total fall was 3818 points. So the 61.8% of the same come to around 2360 points. So the resistance level comes to 2360 points from low of 2539 so the target should be 4899. So nifty has all the fair chances of finding a formidable resistance at 4899. Nifty has made a high of 4889 and then reversed. So till now nifty has not moved above the important resistance level it nearly reached but not breached the level. So till this level is breached nothing can be said. If 4899 is broken then we has all fair chances of seeing 5200 and then 5500.
As can be seen from the above chart nifty has broken out of a triangle formed over a period of three months giving an indicating that market has broken out of a consolidation pattern and we might now see a trending market. So the current scenario is to go long on every fall till the low of Triangle is violated. One warning which I wish to say is that if the middle line of the triangle is violated in any fall then this is the first warning sign and if the lower boundary of the triangle is violated then we should come into cash no matter what the reason is. The low of the triangle is at 4600. So not 4600 become “lakshman rekha” for bulls. So till 4600 is violated bulls can have a field day.
One point to be noted is that the oscillators like RSI, Money Flow Index, Elder bulls ray, ROC are still showing –ve divergence which still give an indication that the under tone is still weak but the market is moving up so 4600 stop loss should be strightly implemented. If 4600 is violated we has to come to cash.
Directional Momentum Index:
DMI is has moved from 11.08 to 17.11 after giving a positing buy indication i.e. movement of +D1 over –D1. The rise of DMI after positive break our is a clear indication that bulls have gained upper hand in the market and they might try all means to decimate bears. It moved above 15 is a first indication of strength of bulls and movement above 20 will confirm the same.
Pivot point trading.
One important thing which has happened during the week is that nifty has moved above the previous years pivot at 4856 giving an indicating that nifty has made a significant break through during the week. Even though nifty has moved above 4856 it failed to close above it. Any weekly close above if would be very good news for the ears of the bulls as it paves way for very good higher levels. for the coming week nifties range would be 4707 and 4920.
Turtle Trading:
Turtle Trading - 20 day Phenomenon (gave buy indication at 4743)
Current trend – buy
Go long above - 4889
Square off - 4577
Go short below: 4353
ATR at 95
M.Sri Mahidar
Sunday 12th September 2009 Time 8:29:30 PM IST.
Trend is friend
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