Nifty Technical update for week ended 18th December 2009:
Nifty opened on a weak note and continues to fall all through the week and virtually closed at the low of the week. One of the significant events during the week is that the markets have gone below the 15 day EMA and also just gone below the 50 day EMA but closed exactly at the 50 day EMA. Next weeks opening is very important as any breach of 50 day EMA has all the chances of taking the market towards 4811 levels which happens to be the 100 day EMA. If nifty is able to sustain above the 50 day EMA then it has all the chances of moving towards 5100 levels before plunging. As nifty has gone below the 15 day EMA now we should see every rise as an opportunity to short. 15 day EMA is placed at 5061 so this not becomes lakshmanrekha for nifty any break of the same on the upper side we should reverse our position from short to long. During the last 9 months nifty has gone below the 50 day EMA twice and then recovered there after and one time take support exactly at the 50 day MA and then went on to make a new high. This is the first time that nifty has moved above 50 day EMA after moving below it and has not made a new high. Is this a possible indication of reversal? So please keep a close watch on the movement of nifty in early part of the week as this might give us an indication of what is in store for the coming week and also the month. One positive thing for the bulls is that the volumes are not increasing along with the fall once the volumes start increasing with the fall then we might see the real fall. But as of not it is not indicating increasing in volumes which is giving an indication that the market might not fall at the faster rate. But it appears that every body is waiting for technical levels to be breached before making a short sell. The put call ration which is the short term indicator of the trend is not placed around 1.10 indicating puts are just move that the calls and just at the walls. The PCR has been continually decreasing during the whole entire week indicating while market was falling every body is buying calls or are closing puts thus giving a clear indication that the upside might be capped at around 5100-5200 levels as of now and if PCR is to be believed the we might not see market breaching 5200 atleast in this month.
it can be seen from the above chart that nifty has broken the one and half months trend line that too on slightly higher volumes, making us to believe that it’s a true break out. If this is true then we might move towards the next support level which happens to be 100 day EMA and also the 5 month trend line which are situated at around 4811 and 4880. So it appears that the fall may be arrested at these levels and any breach of these would be catastrophic for the bulls and bears might just gain a tremendous upper hand on the market and we might see a free fall up to 4500 levels. Till now market has even though formed a lower high it has not formed a lower bottom for confirmation of the end of the up trend. If nifty closes below 4500 then it would confirm the lower bottom which would be sufficient to indicate that the bears have successfully conquered bulls. So just wait for 4500 to be breached before jumping into the market in big.
Nifty opened on a weak note and continues to fall all through the week and virtually closed at the low of the week. One of the significant events during the week is that the markets have gone below the 15 day EMA and also just gone below the 50 day EMA but closed exactly at the 50 day EMA. Next weeks opening is very important as any breach of 50 day EMA has all the chances of taking the market towards 4811 levels which happens to be the 100 day EMA. If nifty is able to sustain above the 50 day EMA then it has all the chances of moving towards 5100 levels before plunging. As nifty has gone below the 15 day EMA now we should see every rise as an opportunity to short. 15 day EMA is placed at 5061 so this not becomes lakshmanrekha for nifty any break of the same on the upper side we should reverse our position from short to long. During the last 9 months nifty has gone below the 50 day EMA twice and then recovered there after and one time take support exactly at the 50 day MA and then went on to make a new high. This is the first time that nifty has moved above 50 day EMA after moving below it and has not made a new high. Is this a possible indication of reversal? So please keep a close watch on the movement of nifty in early part of the week as this might give us an indication of what is in store for the coming week and also the month. One positive thing for the bulls is that the volumes are not increasing along with the fall once the volumes start increasing with the fall then we might see the real fall. But as of not it is not indicating increasing in volumes which is giving an indication that the market might not fall at the faster rate. But it appears that every body is waiting for technical levels to be breached before making a short sell. The put call ration which is the short term indicator of the trend is not placed around 1.10 indicating puts are just move that the calls and just at the walls. The PCR has been continually decreasing during the whole entire week indicating while market was falling every body is buying calls or are closing puts thus giving a clear indication that the upside might be capped at around 5100-5200 levels as of now and if PCR is to be believed the we might not see market breaching 5200 atleast in this month.
it can be seen from the above chart that nifty has broken the one and half months trend line that too on slightly higher volumes, making us to believe that it’s a true break out. If this is true then we might move towards the next support level which happens to be 100 day EMA and also the 5 month trend line which are situated at around 4811 and 4880. So it appears that the fall may be arrested at these levels and any breach of these would be catastrophic for the bulls and bears might just gain a tremendous upper hand on the market and we might see a free fall up to 4500 levels. Till now market has even though formed a lower high it has not formed a lower bottom for confirmation of the end of the up trend. If nifty closes below 4500 then it would confirm the lower bottom which would be sufficient to indicate that the bears have successfully conquered bulls. So just wait for 4500 to be breached before jumping into the market in big.
One of the concerns which I have not till now indicated is that if you could notice in the above chart rounded top formation which is forming from last 40 days. Generally the rounded top formation is one of the power full reversal indications. Now volumes have to confirm. It means if the volumes increase along with the fall this would confirm the formation of the rounded top. So we have to keep a close watch on volumes.
ON Balance Volume:
On balance volume (OBV) one of the power full indicators which generally indicate the reversal of the trend has just given an indication of reversal. The trend line which it has bee respecting from may 2009 after election till the last fall has broken indicating the trend might have been reversed. When ever nifty has fell OBV has taken support at the trend line but this time during early fall the OBV has broken the trend line clearly indicating that we might have just seen the top.It can be seen from the above chart the in the month of march when the market has reversed this has been confirmed by break of down ward sloping trend line drawn from the top of 2008 of OBV and you see markets have risen from those levels. This time exactly reversal has happened indicating that we might have reversed the up trend. If this has to be believed I have no doubt that market is going to move below November low sooner that later. So OBV is indicating bulls beware.
Positive for nifty:
• It is still at 50 day and above 100 day EMA
Negatives for nifty:
• Volumes are increasing with the every fall
• OBV has broken the trend line.
• RSI has moved below 50.
• Weekly MACD and TRIX have given sell signal.
• Huge –ve divergence between RSI on weekly and daily charts.
• DMI is moving down.
• 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.
Directional Momentum Index:
DMI is indicating directionless for the market. This week also the –D1 line is above the +D1 line and DMI is in neutral zone. It has moved from 11.64 levels to around 13.24 levels during the weak which is clearly indicating that bears are slowly gaining upper hand and that down ward momentum is gaining upper hand. Keep a close watch if DMI moves above 16 it would indicate that bears are in for a party in the coming weeks/months.
Pivot Point Trading Strategy:
During the last week market has moved exactly as per pivot it has moved above the pivot reached a high of 5156 then moved below the pivot and pierced the S1 and has exactly closed at S2. For the Coming week weekly pivot is placed at 5041 and if nifty stays below it during the week then we can see 4925 and then 4864. It may be noted that any breach of 4903 it would break the monthly pivot in that case we might see further downsides in the market. So keep a close watch on weekly/monthly pivots.M.Sri Mahidar
Sunday 20th December 2009 Time 19.10 IST
Trend is Friend.
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