Nifty opened on a very strong note on Monday and there after started to slide for the last four days. During the last four days the bears were active. Nifty virtually closed at the lowest point of the weak, i.e. at the opening price only. Indicating that during the week bulls and bears were equally powerful. On weekly charts it has formed a long tail indicating the strength of the bears during the week. Generally when a long tail is formed at the top it is bearish signal and if it is formed at bottom then it is bullish signal. Till the top of the tail is taken out the bears are active. Nifty is not above all the major EMA i.e. 15, 50 and also 100 day EMAs so we can say with confidence that bulls are active as of now. Now also nifty has failed to go past 5400 decisively so till nifty closes above 5400 on weekly basis bulls cannot be confident and bears would try to push the market down. So still 5400 is elusive for nifty. One of the noticing features of the movement of nifty for last two weeks is that nifty has moved above the last one year trend line which it has broken in the month of may. And currently it is just placed at the trend line. We have to see whether it would be take support or once again are broken. If it is broken then it would be a bearish signal and if not broken then bulls can rejoice. In this regard the coming week is going to be crucial. But on thing to be noted is that till 4850 is held the bulls would be rejoicing at every fall. So 4850 is going to be crucial levels to be watched out.
If you see the time series analysis nifty has fallen for 6 weeks from middle of April to end of May and after that it has been raising for 5 weeks and till now it has not crossed and made a new high. In the coming week i.e. 6th week we have to make a new high or other wise we are still in corrective move. If bull market is to be in tact the recovery should take shorter time than the fall so the coming week is going to be very crucial as it going to tell whether we are sill in bull market or not. But as we go by the time series analysis nifty has been raising for 9 to 10 weeks and falling for 3 to 5 weeks for last one year and the trend was only broken in may when market fell by 6 weeks so we can take 1 week exception. So considering this if time series analysis is to be intact we have to see market rise for 9 weeks so nearly 4 weeks are still left over. So if nifty does not move up for continues nine weeks the it would indicate weakness and we can see further weakness. So the coming week is going to be very crucial as per time series analysis.
It can be seen from the chart below the chart below the nifty has broke the trend line from june in May 2010 and again moved above it in june and now placed nearly at the trend line. Any break of the trend line would be disastrous for the bulls and sustaining above it would be disastrous for bears. In coming one to two weeks we would be knowing who would win the race.
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
Negatives for nifty:
• Weekly MACD has given sell signal immediately after giving a buy signal indicating extreme weakness in the market.
• All though the rise from 4800 the ADX has been moving down indicating that the up move lacked strength and it might not last long. But wait for the market to confirm.
Elliott wave:
In feb-march I have indicated in my Elliott study that it would be difficult nifty to move above 5415 and 5585 and till now both these have not be violated so I would furnish the alternative structure if these are violated.
Directional Momentum index – (DMI)
Currently +D1 is above –D1 and +D1 has started to just move down and +D1 has started to move up indicating the bears are just finding themselves. It may be noted that during the entire rise from 4800 to 5375 DMI has been moving down indicating that bulls lack strength. While nifty has moved from 4800 to 5375 DMI has moved down from 31 to 20 currently. So unless and other wise DMI moves up bulls would not be able to take the market up.
M.Sri Mahidar
Sunday 27th June 2010, Time 21.00 IST
Trend is friend
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