Nifty has been rising continually for whole of the week. All the days in the week it closed on a positive note, and closed at virtually at the highest point of the week clearly indicating that the bulls might have taken upper hand whole through the week. There is no doubt that the market is in a uptrend at-least for the short term. But there are so many things which are pointing towards a probable correction is near the corner. You may be thinking that I am a bear and is favor of the bear market its not the case I am only presenting the pictures are has been pointed by the technicals. As per the Fibonacci time periods considering the markets has started to raise after the march 2009 low of 2539 we have now completed 12 months have entered into 13th month which might be over in another 10 to 15 days. I have been pointing form the last five months that we might start correction from end of march 2010 and we are just at the door way of the same. Generally markets correction on completion of 13 months or at the end of the 13 months. Its not that we should correct but we have all the fair chances of correcting the same. Now we come to historical, if you consider the bull market from may 2003 onwards ie. Virtually for the last 7 years markets have rise for more that 13 months only once and that too was for 21 months. On the remaining occasions it has risen for either 8 months or 13 months so considering the historical also we have fair chances of correcting after this month or the correction might be two to three weeks away. The next month is going to be very crucial one as if the market continues to rise even during the coming month also the we can be sure that we might be raising for the at-least whole of the year. So historical Fibonacci time period is also pointing towards probable correction. Unless and other wise we close above the resistance line shown in the chart below we have all the fair chances of correcting from the current levels.
If you can see the above chart nifty is just near the resistance line drawn from the lows of may 2009, nifty has taken support of the line from may onwards and in January it has broke below that and now it has would act as resistance for any up move. I have been pointing from the last January onwards that nifty might rise and find resistance line and then might fall very very violently; this is the perfect technical pattern. Also notice the volumes at top during the last three days the volumes are heavy compared to that of the break out. Technically speaking the volumes at the top are a danger signal as this points out to probable distribution and generally a big correction sets in after the volumes increase at the top. It can be seen from the chart above indicated by yellow circles where ever the volumes were high at the top the markets have corrected heavily. Whether this time also the phenomenon would repeat we have to wait and see. So longs be careful. Technically shorts can be taken at these levels with a stop loss at around 5325 levels.
Another point to be taken into account is, as has been shown by chart above is that nifty has taken three weeks to fall from 5300 to around 4675 levels and it has till now taken 6 weeks to rise but till now has not been able to move past the top. The retracement of the fall has taken more period indicating clearly that bulls are trying the market to take up but have till now failed to take the market up. If you see the current rise from march 2009 onwards when ever nifty has fallen the retracement has taken less time than the fall and this was confirming that the uptrend is intake but from the November onwards the retracement of the fall has taken more time than the fall. And whenever market has risen from November onwards the fall has taken far less time than the rise this clearly indicating that the bears have slowly come into the market and till this phenomenon is reversed we might now see the market rising with a vengeance. So this is also pointing towards probable correction in offering or that we might be in this range for some period to come. Another point to be considered is that if the from November 2009 as the market have taken far less time to fall that the rise and if the market corrects we might see markets correcting very violently and might take far lesser time that the rise of 6 weeks. If this happens this would clearly confirm that the bears have gained upper hand and further downsides are not ruled out.
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:
• Weekly MACD and TRIX are still in sell mode.
Elliotte Wave analysis:
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 DMI has also started to move up indicating that bulls have gained upper hand and that further upsides are not ruled out. DMI is above 30 indicating that the bulls are having strength.
Pivot Point Analysis:
Currently the pivot for the next week is placed at 5211, till nifty is above that level we have chances of seeing 5300 and also around 5400. If nifty goes below 5211 we might see 5152 and 5043. One of the point to be noted is that current years pivot is placed at 5082 and any move below 5082 has chances of seeing big correction where we can see nifty moving towards 4700 or 4500. So we have to keep close watch at 5082 as far as pivot is considered.
M.Sri Mahidar
Sunday 21st March 2010, Time 20.19 IST
Trend is friend
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