Nifty opened on a weak note on Monday moved lower and touched 4675 and there after reversed and closed above 4800 for most part of the week and virtually closed at the highest point of the week but lower than the open of the week. The close at highest point of the week indicates that the bulls are trying to come into the market. One of the noticing features of the current week is that nifty has moved down on opening and then found support at near the 200 day EMA which was at 4650 and nifty made a low of 4675 which is just near the 200 day MA which is till giving an indication that the long term investors are still giving support at 200 day EMA. 200 day EMA is crucial for any market or stock as any move below it would trigger a heavy selling as long term investors would start booking profits or moving out of the market once indices or stocks go below 200 day EMA so as far as next few weeks is considered 200 day EMA is going to be a good support level any breach of the same would result in heavy selling in the index stocks and which would eventually be spreading to the mid-cap sector where in the real panic would set in. Another noticing feature of the current week’s movement is that nifty has taken support at exactly at the 23.60% correction of the entire rise. Interestingly 200 day EMA and also 23.60% retracement are exactly at the same level so in the coming weeks 4650 is going to offer a good support for the market and mind you any breach of the same would make the market to tank towards 4200 just like that so trade or invest accordingly. Another important thing which has happened during the week is that 15 day EMA has moved below the 100 day EMA which has happened for the first time after April 2009 indicating weakness so all this are pointing towards further downwards from current levels.
Elliotte wave Analysis:
As I have mentioned earlier nifty has exactly corrected up to 23.60% of the total rise from March 2009. And I have been mentioning in my earlier write ups that, if we are correcting entire rise then we have chances of correcting minimum of 50% to 61.80%. Considering this we might see the markets correcting some where between 3500 to 3900. so be prepared for the ride.
if we consider that now the market would retracing the fall from January high. Then we are exactly at the 23.60% retracement which happens to be at 4826 and the if nifty moves above it we have next resistance at 4918 and then 4993 and formidable resistance at 5068 which happens to be 61.8% retracement. Generally markets react from 61.8% retracement when it has just started correction. Currently 100 day EMA is at 4919 and 50 day EMA is at 4990 so these might offer some resistances when nifty tries to move up.
Positives for Nifty:
• Market is above 200 day EMA.
Negatives for nifty:
• Nifty is below 15 day, 50 day and 100 day EMA.
• Nifty has also moved below the 15 week EMA for the first time in last 11 months.
• 15 day EMA has moved below 100 day EMA for the first time after April 2009
• Daily MACD is in sell mode.
• Weekly MACD and TRIX are still in sell mode.
• -ve Divergence in RSI on weekly and daily charts.
• DMI has given a sell signal and has moved above 20 indicating that the down ward movement has set in and further downs sides are not ruled out
Directional Momentum index – (DMI)
DMI indicates the strength of the current trend whether up or down. During the last few week –D1 moved above +D1 indicating strength of bears. DMI has moved above 40 indicating considerable strength of the bears so considering this every rise should be taken as an opportunity to book profit or go short.
Pivot point analysis:
Nifty is above pivot point at 4782 so till it maintains above that we have chances of seeing it moving towards 4887 and 4949 if it fails to sustain at 4782 we might see market moving towards 4615.
M.Sri Mahidar
Sunday 14th February 2010, Time 19.12 IST
Trend is friend
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