The movement of nifty during the week offered nothing to offer except on Friday i.e. the budget day. On the first four days nifty moved nowhere virtually flat and on the budget day suddenly in the middle of the trade it moved very very swiftly towards 5000 and made a high of 4992 before reversing and closing at 4922. On of the noticing features of the movement of the nifty during the week is that nifty moved up only during the half an hour on Friday and there after it moved below and closed below 4950 it resistance level which it was struggling to go past for the last nearly one month. Another noticing feature of the nifty is that nifty failed to moved above psychological level of 5000 indicating weakness. But one of the noticing feature of the movement on Friday is that the rise of nifty was on very heavy volumes this is the only one day were the rise on very heavy volumes, we have to see whether there would be follow-up buying to take the market further up or just selling would come. The coming week is going to be a good barometer for the future movement of nifty near future. One of the noticing feature of the movement of nifty during the week is that nifty was struggling to go past the 100 day EMA during and on Friday it just rushes past the 100 day EMA and moved towards 5000 and thereafter reversed to close just above it. The 100 day EMA is placed at 4910 and any movement of nifty below it would be disaster for the market where in it would take the market towards 4800 and towards the 200 day EMA which is placed at 4678. Nifty has very good support at around 4830 any violation of the same would result in nifty just sliding towards 4678. Nifty is also placed above 15 day EMA which happens to be around 4870 considering this any movement of nifty below the 100 day EMA and subsequently below. The movement of nifty during the early part of the next week would clearly give the direction for the market. So keep a close watch on the movement of nifty during the early part of the week.
Two weeks back I have mentioned that nifty has formed a three black crows as per candle and stick pattern and this has very bearish indications and that generally this pattern implies very bearish scenario for the market and also the generally this pattern is retraced by at-least between 50 to 61.8% of the total fall and if you could see in the third chart above nifty has exactly retraced 50% of the total fall. 50% retracement levels was at 4992.65 and nifty made a high of 4992.30 which indicates that nifty has achieved the minimum retracement. So we have all the chances of nifty falling very violently but it has still chances of moving towards the 61.8% retracement level which happens to be around 5067. Generally if history is seen when ever this pattern is formed, it is seen that the fall after the retracement would be more violent than the earlier fall. So if the pattern implications are to be proved we are heading for a more violent fall that that seen during the later part of January 2010.
Positives for Nifty:
• Market is above 200 day EMA.
• Market is above 15 day and 100 day EMA.
• Daily MACD is in buy mode.
• DMI is given buy signal during the week indicating strength of bulls but DMI is moving indicating that bulls are not as strong as they are ought to be.
Negatives for nifty:
• Nifty is below 50 day EMA
• Nifty has also moved below the 15 week EMA for the first time in last 11 months and has found resistance at 15 day EMA.
• 15 day EMA has moved below 50 day and 100 day EMA for the first time in last 11 months.
• Weekly MACD and TRIX are still in sell mode.
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)
Current +D1 has moved above –D1 indicating that bulls might has slowly coming into the market and they are refusing to go down but the DMI which shows the strength of the trend is moving down indicating that they are not as strong as of now as they appears to be.
Pivot Point Trading Strategy
Weekly pivot is placed at 4916 and nifty is just placed above that and if stays above it then we have chances of seeing nifty moving towards 4998 and 5075 and if pivot is taken out on lower side we have chances of nifty moving towards 4839 and 4757. So trade accordingly. It may also be noted that monthly pivot is placed at 4863 and if it is taken out on lower side we might see nifty drifting towards 4734 and 4546. So better watch out at these levels.
M.Sri Mahidar
Sunday 28nd February 2010, Time 20.06 IST
Trend is friend
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