Nifty opened on a weak note during the week further moved down to make a low of 4787 and thereafter recovered for the last three days and successfully moved and closed above 5000. The close above 5000 indicates good strength for the bulls. One of the points to be noted is that the rise of the market on the last two days was on high volumes during the last week. One of the points to be noted is that the last week was a derivatives settlement week and the movement of the market in the settlement week is very difficult to predict. But the movement on Friday after the derivatives settlement week was very jittery. So the coming week would be the interesting week as it would show the movement of the market with new series. Technically till the market stays above 5000 the bulls would feel comfortable. But nifty has to close above 5200 on EOD basis for the trend to turn up till then the trend would be down. So 5200 would be the crucial levels to be watched for by the bulls. One big positive thing about the market is that it is still above 200 day EMA which is clearly indicating that long term bulls are still in the market. Another thing in favor of the bears is that nifty is still below the 100 day and 50 day MA. So till market moves above it the bears would be having upper hand. For the last few days the market is oscillating between 100 day EMA and the 200 day EMA. The 100 day EMA is at 5085 so that would offer some good resistance in its up move. Currently nifty is just near the 100 day EMA whether it would go past it successfully or not we have to see in the coming week. If nifty fails to go past either 100 day or 50 day EMA then we should brace ourselves for nifty to move below 200 day EMA. But one of the points to be noted is that till nifty is above 4675 the trend is up for medium term. 4675 is the crucial level to be watched for the coming month.
It can be seen from the above chart that nifty has found support at the trend line drawn from November lows. Till not it has found support at that trend line and there after moved towards 5300 will it move there now also wait and see. Till the trend line holds there should be no problem for bulls the trend line appears to be at around 5850 levels so that would be the levels to be closely watched if this trend line is taken over then we might see a vertical fall in nifty. So this is the trend line which is to be closely watched in the coming week and months.
Time series analysis: 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 7 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. It has been observed in the previous cases of trend reversal or the time period reversal the markets have risen or fallen for 14 weeks in the first period of time reversal. In January 2008 when market has reversed market has fallen for 14 weeks and in March 2009 when market reversed it has risen for 14 weeks in the first time of reversal. After March 2009 market has for the first time has observed time reversal so whether we would fall for 14 continues weeks this time also we have to wait and watch.
Positives for Nifty:
· Market is above 200 day EMA.
· Daily MACD has just given a buy signal
· +DMI has started to move up and –DMI has started to move down.
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 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 32 indicating strength of bears.
Point and figure charting (P&F):
(P&F) charting is one of the powerful charting, which takes into account only the price. For it price is the king. It doesn’t take into account volumes or any technical oscillators. It takes into account only the high and low prices and ignores open and close. It considers that opening and closing prices can be influenced and not he high and low. The reversal indications by P&F is very power full as for it the trend line is drawn at an angle of 45 degrees angle from either top or bottom. In other forms of technical analysis trend lines are drawn joining highs or lows. As the trend line is drawn at 45 degrees the break
Of the same is a very powerful reversal indicator and generally cannot be ignored. Whenever the trend line drawn at a angle of 45 degree is violated the trend shifts from bull to bear and vice versa. It can be seen from the above that the sloping trend line in pink color is drawn from top of January 2008 was not violated till April 2009 and in April 2009 price has moved above it signaling the trend reversal from bull to bears. A trend line drawn from the low of march 2009 is drawn at 45 degrees blue line is not violated till not and the trend was up. But in may 2009 it has been violated means that price has moved below the trend line which is the first signal that trend might has reversed from bull to bear. These two trend reversals are shown by arrows in the above chart. The break of the blue trend line is a clear indication that trend might have reversed and cannot be taken lightly. But one positive things for bulls is that nifty has moved above the blue trend line on Friday which has given some respite for the bulls. It may be noted that any move below 5000 would violated the blue line so as per P&F charting 5000 is the crucial level. If it is broken then we might see a good and healthy fall.
Elliott wave: Elliott wave analysis of the current movement is given in the chart below. there is two probable alternatives which are shown in the chart below. In the alternative –I nifty would not move above 5160 and in alternative-II we may be seeing nifty raising up to 5092 or 5164. If nifty moves to these levels it would provide a very good opportunity to go short with straight stop loss above these levels. if nifty fails to move past 5160 we have all the chances of nifty moving below it low of 4787 and the movement would be very very swift. So better watch out if nifty moves above 5100 and subsequently moves below it.
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 32 and is moving down any further move might take market further down.
M.Sri Mahidar
Sunday 23rd May 2010, Time 18.44 IST
Trend is friend
No comments:
Post a Comment