Wishing you all Happy and Prosperous New year 2010.
This week was truncated week; the direction of market was directionless. The movement of nifty during the week was limited to 60 points. One significant event taken during the week is that nifty was successful moving above 5200 and closing above it. Movement above and close above 5200 marks a significant event as it was not able to cross above it for the last two to three months. It closed above it only one day, it has to close above it for at-least 3 days to confirm the successful break out. The volumes on the last day of the week were on high indicating that the breakup might be successful. But the last day was the settlement day so the volumes cannot be believed so the coming week is going to be very crucial week as far as market is concerned as it is going to tell the where the market is going to headed for the next few weeks. But the break and close above 5200 cannot be taken as so easily as it marks the break above resistance level which the market failed to break above it at-least four times in the last three months. If it maintains above 5200 in the coming week then the market has chances of moving towards 5500 in very short term. As the market struggled to move above 5200 for the last three months the movement above it should make the market move very swiftly coming week. The swift movement of the market towards 5500 should confirm the successful breach of 5200. If the market does not move swiftly from the current levels then there is doubt in the breach of 5200. Considering all this the coming week is going to determine the status of the market for the short term.As long as 4950 is not violated we have not problem for bulls. The market is still trading above 15 day EMA which is at 5108, so as of now it indicates that trend is up and as long as nifty stays above it we should see for an opportunity to go long at every rise and if it is broken then the strategy should be reversed. The market has completed 10 months of continues rise, it has made a new high after 8th month also giving an indication that market has all the chances of moving up to the next Fibonacci i.e. 13, so the market should rise for another 3 months to complete the Fibonacci of 13 months. One point to be noted that there are the cases where the market have corrected in or after completion of eleventh month, the reason is not know but it has happened. So we have to be watchful in the coming month as it is the eleventh month. It may also be noted that market has historically corrected I a major way in January and February months, if you track the market then this phenomenon can be easily verified. All the investments should be made with straight stop loss as the market might reverse at any point of time.
Now the question arises, when any one would know when the market have reversed there is one simple technique which anybody can easily identify which is indicated below.
If you can see the chart below, market is continually making higher high and higher lows which is a clear indication that the market is in an uptrend. For the last two to three months even though market is not making a higher high it has been making higher lows which clearly indicating the market is finding support at lower levels. Whenever market is falling/correcting slightly, buying pressure is taking the market up. So once market makes a lower low then it would confirm that the trend has reversed. So we can hold on to our investments till the lower low is made. Currently the recent low is at 4943 so till the market trades above 4943 the trend is up. We should continually track the recent lows as the market progresses up and when ever recent low is taken out we can interpret that trend has reversed. I would be covering the same in my weekly update.
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. During the last 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.
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.
Negatives for nifty:
• OBV has broken the trend line
• 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)
DMI indicates the strength of the current trend whether up or down. Currently +D1 is moving up and the –D1 is flat and tilting down ward indicating the bears are losing ground and bulls are gaining strength. Now we have to see whether DMI is indicating strength or not. DMI is maintaining at 15 for the last two weeks even though the market was moving up, giving an indication that the bulls are not as strong as they appear to be. DMI has to start moving up and move above 20 to confirm the strength of the bears. So keep a close watch on the DMI which would indicate the strength of bulls in the current case.
Pivot Point Trading Strategy:
Last week nifty has maintained above the pivot point indicating strength of the bulls but nifty has failed to move towards 5282. For the current week pivot is at 5194 if it maintains above that we have chances of moving towards 5229 and also 5256. it may be noted that monthly pivot is at 5122 so till it maintains above that we have chances of seeing nifty moving towards 5300 and 5400.
M.Sri Mahidar
Sunday 3rd January 2010, Time 19.24 IST
Trend is friend
Now the question arises, when any one would know when the market have reversed there is one simple technique which anybody can easily identify which is indicated below.
If you can see the chart below, market is continually making higher high and higher lows which is a clear indication that the market is in an uptrend. For the last two to three months even though market is not making a higher high it has been making higher lows which clearly indicating the market is finding support at lower levels. Whenever market is falling/correcting slightly, buying pressure is taking the market up. So once market makes a lower low then it would confirm that the trend has reversed. So we can hold on to our investments till the lower low is made. Currently the recent low is at 4943 so till the market trades above 4943 the trend is up. We should continually track the recent lows as the market progresses up and when ever recent low is taken out we can interpret that trend has reversed. I would be covering the same in my weekly update.
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. During the last 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.
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.
Negatives for nifty:
• OBV has broken the trend line
• 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)
DMI indicates the strength of the current trend whether up or down. Currently +D1 is moving up and the –D1 is flat and tilting down ward indicating the bears are losing ground and bulls are gaining strength. Now we have to see whether DMI is indicating strength or not. DMI is maintaining at 15 for the last two weeks even though the market was moving up, giving an indication that the bulls are not as strong as they appear to be. DMI has to start moving up and move above 20 to confirm the strength of the bears. So keep a close watch on the DMI which would indicate the strength of bulls in the current case.
Pivot Point Trading Strategy:
Last week nifty has maintained above the pivot point indicating strength of the bulls but nifty has failed to move towards 5282. For the current week pivot is at 5194 if it maintains above that we have chances of moving towards 5229 and also 5256. it may be noted that monthly pivot is at 5122 so till it maintains above that we have chances of seeing nifty moving towards 5300 and 5400.M.Sri Mahidar
Sunday 3rd January 2010, Time 19.24 IST
Trend is friend
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