Nifty opened on a strong note and continued its up move all through the week. Nifty moved above 5000 but failed to sustain above 5000 for the last three days. Nifty is still maintaining above the 15 day Moving Average giving an indication that nifty is clearly in a uptrend, till the time it maintains above 15 day EMA every fall should be used as an opportunity to short. 15 day EMA is placed at 4893 so till it is above it we should take it as an opportunity to go long at ever rise, if it moves below this we can be short on the market. One of the points to be noted in this week movement is that the nifty is witnessing selling pressure whenever it is reaching or moving above 5000 indicating that it has to decisively move above it to indicate strength. Previously also nifty found it difficult to move above 5000 and after much effort it moved above it and then collapsed two weeks back. So 5000 appears to be a crucial level for nifty. It may also be noted that on 13th nifty has completed 8 months of rise and it happens to be Fibonacci so we have chances of markets correcting after completion of Fibonacci that too 8 so we have to be careful with our trades. If this month also markets move up continually then we have chances of markets moving up for another 4 months. Now we have to see whether there occurs any divergences between the oscillators and the nifty to see for any probable reversal indications. In the present scenario nifty has formed –ve divergence and there after corrected so this correction cannot be ruled out. If we have observed the volumes during the week they through unique feature, the days on which the market has closed positively the volumes were less and the day on which nifty closed negatively the volumes were heavy indicating that some amount of distribution going into the market. Volumes have to increase with rise to confirm the strength of the market. Another thing which has to be noted is that nifty has taken 10 days to fall from 5174 to 4536 and now it has completed 8 days of rise, it has to rise above 5174 in next two days to confirm the strength of the market otherwise there is doubt on the rise of the market. So next two days are going to be crucial for the market so better watch out. I have indicated in the in one of my updates in three weeks back that nifty has broken the trend line from march low and there after it has fell viciously, generally markets have tendency to move up to the trend line and then fall even faster. The trend line resistance is placed at around 5200-5250 so if nifty corrects from those or near those levels then we can be sure that correction might have started.
Elliotte Wave Analysis:
Whatever is discussed in my previous weeks update still holds good and will discuss the alternatives if the market behaves differently.
In the chart below it can be clearly seen that nifty has broke the trend line from march low and now moving up towards the same if nifty fails to move above that trend line then down trend is confirmed or that market is weak that the earlier. And also the another trend line shown in the chart below is placed at around 4800 levels if nifty breaks this trend line then we can be sure that the down trend has started and further down sides are not ruled out.
Directional Momentum Index:
DMI is indicating directionless for the market. So market has to indicate the same so we have to closely watch the DMI as the way it gives a break out the market might move heavily.
Pivot Point Trading Strategy:
Nifty has behaved exactly as per the pivot, nifty did not moved below the pivot and there after it moved above the R1 and also moved towards R2. R2 was placed at 5021 and nifty made a high of 5017. For the coming week the pivot is placed at 4935, if nifty stays above it then we can see 5080 and 5163 and if it moves below the pivot then we can see 4852 and 4704. So trade accordingly.
Point and figure charting:
It can be seen from the above chart that nifty has bearish resistance line which is drawn from the high of January 2008 as per the point and figure charting. It can be seen from the above that nifty has reversed exactly on touching the resistance line and now it is nearing the same. We have to see if this is broken this time or not it has to be broken with volumes then it would confirm the up move or the break out. Generally in Point and figure charting volumes are not considered. So any break and sustaining above the resistance line would open up the gates for making a new high. It is not place at 5150, if market reverses on reaching the same then we can be sure that we might see 4500 in very short time.
M.Sri Mahidar
Sunday 7th November 2009 time 17.35 IST
Trend is Friend.
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