Nifty moved on a positive note during the entire week and also closed on positive note week on week. Nifty has closed above 5000 for second consecutive week indicating strength of the bulls and now 5000 appear to be formidable and also psychological levels for nifty. As has been indicated by me in my last week’s update nifty has found resistance at 5160, the area between 5160 and 5202 would be the formidable level to be crossed. If nifty fails to go past these levels then we have all chances of nifty moving towards 4700 once again for details please refer section under Elliott wave. One of the noticing features of this week’s movement is that it has moved above 50 and 100 day EMA, which were offering resistance in previous two weeks. The movement above these two EMAs is an indication of short term bullishness in the market and it gives scope for further upside movement. But these MAs are now at 5098 and 5070, means they are very near and we have to see whether they would offer support now if nifty turns down.
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 8 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. Nifty has to move below 4675 by the end of next week to indicate the strength of bears. You may be asking question as to why? Because it took 9 weeks for the market to rise from 4675 to 5399 so it should move below it in lesser no of days in order to indicate strength in reverse direction. If nifty fails to move below 4675 this week then we can be sure that bulls have strength and bears have weakned. 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.
· Market has moved above 15 day, 50 day or 100 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:
· 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 26 indicating strength of bears.
Elliott wave:
Elliott wave analysis of the current movement is given in the chart below. there is two probable alternatives which are shown in two charts below. In the alternative –I nifty would not move above 5160 and in alternative-II we may be seeing nifty rising maximum upto 5290.. 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 during the week has moved from 32 to 26 indicating that bears are losing ground in the market. Even +D1 is moving up and –D1 is moving down which clearly indicating that bears have lost ground and bulls might have gained upper hand. In the current week bears might make an another attempt if they fail we might see very good swift upside movement.
M.Sri Mahidar
Sunday 06th May 2010, Time 19.29 IST
Trend is friend
