Nifty opened on a strong note continued to move up during whole of the week except on Friday it closed on a negative note. Last week I have indicated in my weekly update that the long tail formed on Friday the 26th Nov was not good for bears and that the bulls might gain upper hand at-least for the short term and the same appears to have happened during the week. Nifty is still above the 15 day EMA which clearly is giving an indication that we should see an opportunity to go long on every fall. 15 day EMA is at 5055 and any move below this should be taken as an opportunity to short. So please keep a close watch on this as this is very near to the weekly close of 5108. This week also nifty has went up near the previous top and then reversed. It went up above 5151 and towards previous high at 5181 and then reversed towards 5100 level. It failed to close above 5150 precisely above 5200 levels for the third time in last one and half month and also twice in last week, giving a clear indication that 5150 is a formidable resistance which has to be broken at-least for the short term. 5180 happens to be also to be near the crucial resistance level which would be discussed in the elliotte wave analysis. One thing is sure that nifty is facing formidable resistance at 5200 levels. Now it is sure that unless and other wise 5150 it taken out successfully and also 5200 then only bulls can be strong other wise bears would be coming into the market slowely to take the market to further down sides. All the technical oscillators are not showing any strength to the ongoing up trend and are pointing towards probable reversal rather than upside breakout which every body is expecting. Till 4700 is taken out the bulls would be making attempt to take the market higher if 4700 is taken out then we might see a bigger falls that we have seen in last eight months. We can observe in the market that even though the market is at the same level during the last one and half month, activity has picked up in the madcap stocks and they are just running away thus giving an indication that the activity has shifted towards midcaps which generally take place in the last stage of the rise. Directional Momentum index (DMI) which is one of the most power indicator of strength is still moving down which is clearly giving an indication that the rise is loosing momentum and also it lacks strength details discussion would be made at DMI discussed below. Market is giving clear indications of weakness but it is still not shown in the price so we have to patiently wait for the market to give its direction an just jump into it to generate good profits. So bears please have patience.
It can be seen from the chart below that nifty has formed a lower low compared to that of last month. Last months high was 5182 and nifty has reversed after touching 5181 giving a clear indication that the market might be slowely going into the hands of bears. Whether we have formed a double top or market would make strong rally from the current levels we have to wait and watch. It can also be seen from the chart below the there is a huge –ve divergence between the nifty and RSI, while RSI is moving down towards making a low nifty if moving up and trying to make a new high. This divergence appears to be huge so pointing towards probable reversal but we have to wait for the
Market to give the clear signal than jumping into the market on the short side. let the market confirm the trend and then jump as the chances of going wrong are less than that of now. So just keep a close watch.
Positive for nifty:
• It is still above 15 day, 50 day and 100 day EMA
Negatives for nifty:
• Volumes are increasing with the every fall
• Weekly MACD and TRIX have given sell signal.
• Huge –ve divergence between RSI on weekly and daily charts.
• DMI has given a sell signal – but DMI has to move above 20 to confirm the trend.
• Daily MACD and TRIX are in sell mode.
Elliotte wave analysis:
During last few weeks it has been indicated that, 5195 and 5520 are the targets which have to be broken, I have also indicated that if nifty fails to move above 5195 and then we have chances of nifty moving towards the low of November. It has gone near 5195 twice during last one week and thrice during last one and half months giving an indication the 5195 offers a formidable resistance. As nifty has once again failed to move above 5195 we have all chances of seen 4500 in near future.
Directional Momentum Index:
DMI is indicating directionless for the market. This week also the –D1 line is above the +D1 line and DMI is moving down wards, it has moved from 16 levels to around 14 levels during the weak which is clearly indicating that the market is directionless and any call on eight calls should not be taken and should be taken only when DMI give an indication of strength in that direction. Till that time it is better for us to wait patiently. Even though market has moved during the week –D1 is maintaining above +D1 giving an indication that bears are still having slight upper hand but are failing to take control over the market, which is clearly indicated by the down ward movement of DMI.
Pivot Point Trading Strategy:
Last week nifty has moved exactly according to pivot strategy. It stayed above the pivot and it virtually went near the R2 level before reversing towards R1. as can be seen from the above table weekly pivot is placed at 5077 as any move below it would take nifty to 4973 and then 4838. And if nifty stays above the pivot then we have chances of seeing 5212.
M.Sri Mahidar
Sunday 6th December 2009 Time 19.07 IST
Trend is Friend.
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