Nifty opened on flat note and it moved above and closed on positive note and there after whole through the week and reached pinnacle on Thursday and Friday where in nifty tanked to move below psychological level of 5000 and finally closed above 5000 on Friday. On Friday nifty opened on a very weak note to make a low of 4954 and later in the day recovered to close at 5036. Nifty fell and recovered on later on Friday the volumes were at a record high indicating for the time being that heavy buying has come into the market when nifty fell sharply on Friday. Nifty has exactly found support at the trend line drawn from the lows of June 2009 and on just piercing the line the indices have bounced like a spring action. This is giving an indication that in the two to three weeks we might not see the bottom made on Friday. There a long tail (shown in the chart with a blue circle) when the market fell on Friday, the long tail which is formed on Friday indicates the strength of the bulls. Generally it is observed whenever the long tails are formed these are not easily broken generally associated with unexpected recovery. Unexpected recovery in this case indicates that nifty might move up rapidly surprising everybody. I has also observed that majority of the stocks which form nifty are in extremely oversold condition which is also indicating the recovery is near. Another thing which has to be considered that if the bottom of the long tail at 4594 is taken out then we can see a panic selling in the market. On the important even during the week is that nifty has moved below 15 day and also 50 day EMA in one week only indicating the strength of the bears but till 4943 is violated there should not be problem for bulls. So 4943 is the crucial levels to be watched in weeks to come.
It can be seen from the chart that above indicated by blue arrows that nifty has been finding support at the trend line and this time also indicated by blue circle has found support exactly at the trend line. As I have been indicated in my earlier updates till this line is respected there would be no problem for bulls. This time also as it has taken support at the trend line indicating that for the time being bulls are still have strength and bull market is still intact. Once this support line is taken out we can safely assume that bull market has ended and come into cash.
Positives for Nifty:
• Nifty 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:
• Nifty is below 1 5 day and 50 day EMA.
• Weekly MACD and TRIX are still in sell mode.
• -ve Divergence in RSI on weekly and daily charts.
• DMI is still not moving up
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. Nifty has moved above 5195 moved till 5300 and then reversed and then moved below 5195. We have to still chances of moving towards 5500. Till 4943 is not taken out we have still chances of moving toward 5500, so 4943 is the level to be watched in the coming weeks.
Directional Momentum index – (DMI)
DMI indicates the strength of the current trend whether up or down. During the current week –D1 has moved above +D1 and is steadily moving up indicating the strength of bears.DMI has moved from 16 to 18 indicating the bears are gaining strength. But till now it has not moved above 20 to confirm the trend.So we have see whether it moves above 20 or not. If it moves above 20 then the pace of fall would increase.
TRIN:
This week I am mentioning about TRIN also know as arms index, as this is one of the indicator which tell where the buying is going eight by bulls are bears. During the bear markets it would be above 1 and in case of bull market it is below 1. It is purely based on volumes only; it does not take into account price but generally give the undertone of the market i.e. whether buying is going into advancing stocks or stocks which are falling. Generally TRIN would be inversely related to the market, when market raises TRIN would fall and when market falls TRIN should rise. TRIN is at present at 0.70 and is moving down indicating that buying is going into stocks which are rising and not into stocks which are falling. When the market is falling for one week TRIN should move up but it is also moving down which indicates that we might see reversal of the market very soon. TRIN is giving an indication that we might see market rising very swiftly. As TRIN is below 1 it is clearly indicating that we are still in bull market and not the bear market. So once TRIN starts to move up and moves past 1 the markets would start to fall very rapidly. So we have to keep a watch on TRIN carefully as it shows where buying is going into.
Pivot Point Trading Strategy:
Last week pivot point trading it moved below pivot and then just collapsed for the coming week pivot is placed at 5094 and if nifty breaks above this we have chances of seeing 5234 and there after 5432. But if nifty fails to move above 5094 nifty has all chances of moving towards 4896 and 4756. So we can trade accordingly.
M.Sri Mahidar
Sunday 24th January 2010, Time 17.24 IST
Trend is friend
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