During the week nifty opened on a weak note made a low of 5169 and there after moved up to make a high of 5279 and finally closed at 5252. Whole through the week nifty oscillated only 100 points and on the last two days it oscillated only in 30 points only. One of the noticing features of this week’s movement is that nifty has taken support at the 15 day EMA and bounced instantly indicating the 15 day EMA is proving good support for the market. As nifty is still above 15 day EMA all the falls should be taken as an opportunity to go long, it appears to be at 5211. So till nifty is above 5211 bulls would be having upper hand. But bulls to gain upper hand they have to move above and close above 5300 then only it would have all chances of moving towards 5500. But any close below 5200 especially below 5180 would strengthen the hands of bears. If nifty closes below 5180 then it has chances of moving towards 5111 and 5050. But till 4943 is not violated bulls would have upper hand. It may be noted that nifty has completed 11 months of rise and there are many instances where in markets have corrected after completion of 11 months. If it does not correct now we have all chances of nifty moving up till the middle of March 2010 to complete 13 months of rise which happens to be next Fibonacci.
It can be seen from the above chart that nifty is finding resistance at the trend line drawn from the high of May 2009 which presently happens to be at around 5320 and strong move above this trend line wound offer tremendous strength for bulls and any failure of nifty to break that would not rule out further down sides for nifty.
It can be seen from the above chart that nifty is moving in a rectangular pattern is still not came out of the pattern. On the lower side the support is at 5050 and till this is not violated there would be no problem for bulls. Nifty has to close below 4940 for trend reversal as once it closes below 4940 lower bottom is formed which confirms that trend might have reversed.
Elliott wave analysis:
For the last two to three months I have been indicating that 5195 and 5520 are the crucial levels which have to be cleared. I have also indicated that 5195 is the crucial level to be broken an if it is broken then we have fairly good chances of nifty moving towards 5520 and any breach of the same has chances of taking market towards a new high. Nifty has successfully moved above 5195 and closed above it which is giving an indication that in a month or two nifty has chances of moving towards 5500 so be prepared for the same. But in any case 4943 should be closely watched. During the week nifty has found support again at 5195 should augur well for bulls.
Positives for Nifty:
• Nifty is above 15 day, 50 day and 100 day EMA
• RSI is above 50
• DMI has given a buy signal but it is still below 20, it has to move above 20 to confirm the strength of trend.
• Daily MACD is in buy mode and also above the trigger line.
• Market is forming higher highs and higher lows.
• OBV has moved above the trend line after breaking through it.
Negatives for nifty:
• Weekly MACD and TRIX are still in sell mode.
• -ve Divergence in RSI on weekly and daily charts.
• DMI is still not moving up
Directional Momentum index – (DMI)
All +D1, -D1 and DMI are moving down. +D1 is above –D1 and is moving down. DMI has moved from 19 to 18 during the week indicating that the market lacks direction. So we have to still to wait for DMI to move above 20 for confirmation of the trend.
Pivot Point Strategy:
During the week nifty has just followed the pivot point strategy. I moved below the pivot made a low of 5169( S1 happens to be 5171) then moved above the pivot of 5240 and made a high of 5300 ( R1 was 5314). And now poised just above the pivot. If nifty breaks pivot on down side it has chances of moving towards 5181 and 5109 and if it stays above it then it has chances of moving towards 5312 and 5371. So you can trade accordingly.
Individual stocks:
Western India ship yard: Rs.15.07
Western India ship yard appears to have formed a head and shoulders pattern over a period of 20 months and appears to have just broken above the neck line and notice the volumes on break out which appear to be heavy. So currently the stock can be bought and the target for the same comes to around Rs.25-27 as per the pattern. As it has just broken above the neck line stop loss can be made on close below that neck line which happens to be around Rs.14.
Walchand Nagar Industries: Rs.230/-
Any break above 235 would enable the stock move out of consolidation for last six months and propel it towards 300 and if 300 is taken out we have chances of seeing 500 in quick time. It can be seen from the chart there is congestion moving averages and stock is just coming out of that and moving averages are opening up thus giving a clear indication that the stock might move to higher levels from current levels. Stop loss can be coolly put at 200 day EMA which happens to be Rs.201.
M.Sri Mahidar
Sunday 17th January 2010 Time 18.14 IST
Trend is Friend.
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