The movement of nifty during the weeks was one of the eventful week, not because it has moved as has been envisaged but due it has been dominated by the external news around the world. Nifty opened on a weak note and continued to be weak throughout the week. And it has closed the week with a loss. During the week the technically the charts have been damaged to a great extent. The damage has been on a greater extent on the markets technically. Last week nifty has moved below 50 day EMA and it has found it as resistance at that level and in the beginning of the week it has successfully moved below the 100 day EMA and has struggled to move above at-least for the next two days and then collapsed to the 200 day EMA in the last two days of the week, on Friday at the opening it moved below the 200 day EMA and by the end of the day it was able to move and close above the 200 day EMA. The movement of a nifty below 200 day EMA and closing above it does indicate that bears were able to take the indices below the 200 day EMA and bulls were successful in keeping the markets above that crucial level. Till the market maintains above the 200 day EMA the long term investors would be there in the market any move below it would be disaster for the markets as heavy selling would be coming into the market. So in the coming weeks 200 day EMA should be keenly watched as it would give the clear indication for the market at-least for the coming weeks. On the daily charts nifty has formed a hammer indicating that nifty bulls might be having upper hand at-least for the short term.
One of the important point to be noted is that nifty has for the first time after one year moved below the 200 day EMA even though it moved above it, the movement below this is a significant event as bears were successful in taking it at least below it. if it happens for the second term the this would be disaster for the bulls as bears would gain complete upper hand in the market.
It can be seen from the above chart that nifty has broken below the trend line from the last one year which is gives an indication that markets is at the weakest point in last one year. It has broken below the trend line followed by movement below the 200 day EMA which is clearly indicating that weakness is coming into the market. It can also be seen from the chart that nifty has taken support at the trend line drawn from low of November and it has taken support at that trend line at-least twice including current. In my view as nifty has broken the trend line of larger time frame the shorter term trend line is a matter of time before it is taken out. As nifty has taken support at the 200 day EMA and also trend line from November 2009 we might see some bounce from these levels towards 5100 levels and then might start its downward journey during which time it might break the 200 day EMA and also the trend line decisively. So watch out for the short term bounce from the current levels. It may be noted is that till nifty closes above the 5200 levels the trend is down. So any close above this levels would take nifty to up turn.
I have been mentioning from the last few weeks in my time series analysis that nifty has been raising for 14 weeks to 10 weeks and has been falling for 5 weeks or 3 weeks. And I have also indicated that any change in time periods would be the first confirmation of the reversal of the trend. This has happened for the first time in march 09 and trend has reversed from bear to bull phase. And the fall of this time has been for 6 weeks which is the largest of any fall in the current up move which is giving a clear indication that the trend might have reversed and we might be heading for further down sides. So if time series analysis of the past are to be followed then I have no doubt that nifty might be falling the at-least for another 4 to 5 weeks. So as far as time series is considered we should be prepared for a bear hug.
Positives for Nifty:
· Market is above 200 day EMA.
Negatives for nifty:
· Nifty is below 15 day,50 day and 100 day EMA.
· 15 day EMA has moved below 50 day EMA and also 100 day EMA
· Daily MACD has given a sell signal.
· Daily and Weekly TRIX are still in sell mode.
· Weekly MACD has given sell signal immediately after giving a buy signal indicating extreme weakness in the market.
· DMI has moved above 20 presently at 30 indicating strength of bears.
Elliott wave:- In my weekly technical analysis as on 27th March 2010 I have indicated that as per Elliott in case of first wave extention it would be difficult for the market to move past 5420 and till not market has not moved above 5420 it virtually made a high of 5399 but did not go past 5420 thus confirming that pattern and also target. This is also giving an indication that we might have topped out. The targets as per Elliott would depend on the pattern which it is expected to form. I would be furnishing the same after I have completed the same till those times enjoy the ride, probably bear ride. The probable structure is given in the below chart. It may be noted that any move and close above 5200 would negate the present structure.
Directional Momentum index – (DMI)
+D1 has moved above –D1 and has reached 37 and also DMI has started to move up and it has moved above 20 during the week indicating that bears have taken control of the market and further down sides are not ruled out. Currently DMI is placed at 30 and is moving up any further move might take market further down.
M.Sri Mahidar
Sunday 23rd May 2010, Time 18.44 IST
Trend is friend
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