Nifty opened the week on a weak note and there after became strong and moved up towards 100 day EMA and then reversed down wards towards 4800 in the last two days of the week. It appears that nifty has formed a strong support at 4800 for the time being and on the upper side it appears that 100 day EMA happens to be formidable resistance. This week also when nifty moved up sharply it made a high at 4929 which also happens to be very near the 100 day EMA currently 100 day EMA is placed at 4915. So unless and other wise 4915 is taken out there is no hope for bulls and till 4800 is taken out no hope for bears and till the market stays in between these frustration for the trades and it is advisable to trade only intra day and no carry forward trades may be initiated in nifty only. The coming week happens also happens to be a budget week and as usual the market swings wildly during the week and this point to be taken into consideration while trading. One of the important points to be noted during the current weeks movement is that nifty has made a failed attempt to conquer 100 day EMA for the second time in the last fifteen days( indicated by arrows in chart). When ever this phenomenon has happened in the last two years nifty has tanked by nearly 1200 points. Whether there would be any different this time we have to wait and see. It may also be noted that 15 day EMA has moved below the 100 day EMA this has also happened for the first time after the April 2009 indicating weakness in the market. The MA are clearly indicating that the under tone has definitely turned weak and bulls are just trying to show their strength. So technically it appears that market might tank at any point of time and it appears that it is waiting for the major event i.e the budget to decide.
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 50 day and 100 day EMA for the first time in last 11 months.
• Daily MACD is in sell mode.
• Weekly MACD and TRIX are still in sell mode.
• DMI is given sell signal and has moved above 35 indicating the clear strength of the bears.
As can be seen from the second chart nifty has formed a three black crows( indicated by me 15 days back in weekly update) this is a very bearish pattern and that too on weekly charts is extremely rare and its implications are very very bad for bulls. The implications for the same are very bearish and it would be negated only and only when nifty breaks above and makes a new high.
Elliotte wave:
As per Elliott wave it appears the trend might has turned down and we might be heading down wards. I have indicated in my earlier monthly analysis the probable alternatives and in the next week I would again give the probable formation and structure and the targets. But today I would be giving the minimum targets which markets have to achieve if the reversal is correct. As per the Elliott wave if market is correcting the entire rise from March 2009 then we have the minimum target of 4650 and in my view it should be 4246 which is the 38.1% retracement. If we seen historically nifty has corrected anywhere between 50 to 61.8% when the nifty has corrected after substantial rise. so the total rise of nifty is around 2800 points so we might see a fall of either 1400 points or 1730 points thus giving a target of 3900 and 3500 so we have still a way to go before market reverses.
Directional Momentum index – (DMI)
Currently DMI is in sell mode and is above 35 indicating extreme strength of bears. And generally when ever DMI moves above 30 or so markets generally halt and then fall with vengeance so in coming weeks we might see a good healthy fall in nifty.
Pivot Point Trading Strategy:
For the coming week pivot is placed at 4852 and till nifty stays above that we have chances of seeing 4921 and 4998. It may also be noted that monthly pivot is placed at 4983 and till nifty maintains below that we have chances of seeing 4665 and 4448.
M.Sri Mahidar
Sunday 22nd February 2010, Time 11.29 a.m.IST
Trend is friend
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