Nifty during the week was on a positive note except on Monday, nifty opened on a weak note and there after continued to move up during the balance part of the week. Nifty is now placed just below the 52 week high which happens to be at 5310, now the closing price is at 5282. For the short term the market now appears to be at in a uptrend so whatever may be our institution we should try to follow the trend rather than to go against the trend. If Nifty decisively closes above the January high then we can see it moving towards 5450 and next target should be 4600. But it should decisively close above the 5310, it would be better if it closes above that level for three consecutive days. So the coming week is going to be very important for the market as it is going to take the market to the new horizon or we should go to the 5000 levels. Technically the markets seems to be in over bought zone which indicates that we have chances of markets correcting before it raises, but historically there are cases where in markets have stayed in over bought zone for considerable long period of time. So till the markets give a reversal signal its better to stick with the trend even though the markets in giving an indications of reversal. It better to stick to the trend. As has been indicated by me in my last week’s update, we have completed 12 months and are now into 13 weeks and generally markets have corrected when they have completed Fibonacci time period of 13, I have indicated in my last week’s update historically markets have risen continually for more than 13 months only one time in the last seven weeks and in all the cases it has been 8 months or 13 months. So considering this we might have chances of market moving down after completion of the same. market has started to rise from 2539 formed on 6th of March 2009 and we would be completing 13 months on 5th of April 2010 so we have still one weeks left for the market to make an upward attempt. So we have chances of market making a top in April and then starting correction at any time between 6th of April and 6th of May 2010. So keep a close watch on this time period. For the short period of time the market is in a uptrend so until it turns down try to go long only.
· Market is above 15 day and 100 day EMA.
· Daily MACD is in buy mode.
· DMI is given buy signal but DMI is virtually flat during all the rise indicating that bulls are not as strong as they are ought to be.
Negatives for nifty:
· Weekly MACD and TRIX are still in sell mode.
It can be seen from the above chart that the while nifty is raising the A/D line is falling indicating that the rise is associated with fall in A/D line. The fall in A/D line indicating that the number of stocks decreasing is more that the number of stocks rising. It can be seen from the chart above that A/D line is at nearly six months low while nifty is going to make a new 52 week high. This divergence is one of the powerful indicators of reversal. This is indicating that all is now well with the market. The chart is clearly indicating that the declining stocks are more than the advancing stocks which clearly giving an indicating that the rise is not broad based. This is clearly indicating that the market reversal is near, but it is yet to confirm. Till it confirms we should see for going long that short.
Elliott wave analysis: in detail:
Till now I have been providing the Elliott wave analysis only explanation without any chart analysis. This week I am furnishing the Elliott count from the bottom of 2539. As the market is defying all the technical’s I have decided to go deep into the Elliott wave analysis, which generally give a clear picture in uncertain market and true to its nature Elliott has provided me the clear picture of the current state of the market and also the probable targets. The details Elliott count of the current rise is provided below in the chart.
It can be seen from the above chart which clearly showing the probable elliotte wave count from the low of 2539 as on 6th of March 2009. As per elliotte wave count furnished above we seem to be in the last and final wave of the current up move the completion of the same. Now I would provide the detailed analysis of the Elliott count.
Wave – 1 ( in the present case it appears that the wave-1 is the extended wave and all the projection is arrived taking that into account.)
Wave – I from 2539 to 4673 a rise of 2154 points in 14 weeks ( note market corrected after 13 weeks)
Wave-2 from 4673 to 3974 a fall of 719 points and took 4 weeks( note just after Fibonacci of 3), which is 33% of the wave-1 which is near the Fibonacci of 38.10( when wave-1 is extended wave -2 would be less than 38.10% and to prove it true nifty has corrected only 33%)- the pattern formed for the corrective wave is a zig-zag.
Wave-3 from 3974 to 5181 a rise of 1207 points and it again took 14 weeks (note again corrected after Fibonacci of 13). If Wave-1 is extended wave-3 should not be more than 61.8% of the wave-1. In the present case it is 56.08% justifying my assumption of the extended 1st wave
Wave-4 is from 5181 to 4675 a fall of 506 points and took 17 weeks (which is not a Fibonacci very rare).As per alternation theory of Elliott wave-2 and wave-4 should alternate means they should not be the same. Considering this, the wave-2 wave a zigzag so the wave -4 should either be a flat or a triangle. In the present case its I a flat and it happens to be irregular flat.
Wave – 5 now it appears that the wave -5 has started from 4675 and not placed at 5282 a rise of 607 points.
Now question comes what would be the probable target which the 5th wave would achieve or expected to achieve. One of the things which should be noted is that 3rd wave would never be the shortest wave so wave-5 would not be longer than wave-3 so in any case it would not be longer than 1200 points so the maximum target should be 5875( not more than that in any case in this assumption). Generally historically it has not been the case. If the wave-1 is extended then the wave -5 would be generally be either 38.10% or 61.8% of the wave -3 so the wave-5 should be of length 460 points or 746 points from 4675. So the target should be 5134 and 5420. The market has gone above the 5134 so now the next target should be 5420.
Another case to be observed is that if the wave-1is extended there is all a possibility that the whole advance should terminate at 38.20% above the 1st wave. In the present case the first wave is of length 2154 points and has ended at 4693. So the 38.20% of wave-1 works out to 820 points. So the there is all probability that the whole advance should terminate at 820 points added to 4693 so the target comes to 5513. So it appears that the 5th wave which is in progress has all the probability of completion at 5513 which is nearly 200 points away from the present levels.
As far as Elliotte wave analysis is considered we can seem nifty inching towards 5420 or 5513. So better watch out at those levels. You may also note that the coming week we might be completing 13 months and we are also in the fifth wave so we have all the chances of market reversing. Another point to be noted is that the 5th wave has completed 6 or 7 weeks now so we are also nearing or entering the Fibonacci week of 8 so all these are converging pointing towards probable reversal.
Now we would see what the breakup of the 5th and final wave (Probable).
I have given the breakup of the 5th wave in the above chart. It appears that we are in the 3rd wave of the 5th wave and after that we would be seeing the 4th wave which has chances of ending at around 5200 and there after the fifth and final wave of the fifth wave would start and has chances of progression towards 5500 where the wave is expected to end.
In the above chart it appears that the 3rd wave is the extended wave so there are all possible chances of it being a failure if not it has all the possible chances of attaining 61.80% of wave -3. In the present case
Wave- 1 was from 4675 to 4929 a rise of 254 points
Wave-2 from 4929 to 4805 a fall of 124 points which is nearly 50% (again a Fibonacci) of the wave-1.
Wave-3 as it is extended its minimum target should be 161.8% of the wave-1, so the minimum target of wave-3 should be 410 points from 4805 and it comes to 5215 and it seems that we have already achieved the same. So we might be progressing towards the next Fibonacci which happens to be 2.618 for that the target comes to 5469. So now we might see the wave-3 ending any where between 5300 and 5469 after which wave -4 would develop
Wave-4 has not yet started and it expected to end at around 5200 to 5250 levels and there after wave -5 would commence.
Wave -5 is expected to commence from around 5200-5250 levels and raise around 250 points from the end of wave-4.
So we are in formation of the final two wave of the entire wave structure in my view it is expected to last around two weeks and there after we might see the market falling. In the present case I am assuming that the 5th wave might be a failure, as it would enable the faster retracement of the rise.
Elliott has clearly provided me the probable target and also the probable structure of the market in the present case. Which is at-least giving an indication to be carefull with the market as the market is about to make a medium term top which might not be breached in the current year. I am also planning to prepare a detailed analysis of the nifty as per Elliott and would also be proving the probable structure of the market in the next few years and also highs or lows which it is expected to achieve.
Hope it might have given you the clear picture in the present case of uncertainity.
M.Sri Mahidar
Sunday 29th March 2010, Time 10.49 IST
Trend is friend
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