Nifty opened positively during the week and there after moved in a narrow range of 100 points only and closed at 5393. One of the noticing features of the current move is that nifty has made a new 52 week high. Nifty has successfully moved above 5400 which was a formidable resistance for last at-least six months. One of the noticing features is that it was not able to sustain above 5400 and did not close single day above 5400. Even though it moved above the resistance level of 5400 it failed to sustain above it is giving a clear indication that 5400 still offers a formidable resistance and weekly close above it is required for the market to run away from band of 4800-5400 which it was moving for the last one year. One of the noticing feature which is developing is that DMI has moved above 20 and is presently placed at 24 and is moving up giving an indication that further upside movement is not ruled out. So the upward movement of DMI along with +D1 is giving an indication that bulls are slowly but steadily coming into the market. So if DMI continues to move up along with rise in price then we might see a blow off movement in nifty which has been in narrow range for last one year. another positives which has developed over last two weeks is that Weekly MACD which was in sell move has given a buy move and we have to see whether market sustains or again it moves down to give sell signal.
It may also be noted that as per candle and stick parlance, it has formed an inverted hammer which is an indication that even though market has moved up during the week bears are showing strength and as per this if the last weeks high is not take out we might see market drifting slowly down wards.
It may be noted that nifty has been moving up for 9-10 weeks and there after falling for 5 weeks for last one year and it appears that the pattern is still being followed. I have been indicating about the time series analysis for past few months and nifty has been correctly following then and we were able to identify the time periods during which the markets might reverse. As has been indicated by me, the entire fall of April and May has take 6 weeks and also the rise from may end till now has consumed 6 weeks and markets were not able to make a new high, which is clearly indicating that market is taking longer time to move up and shorter time to fall. Till this phenomenon exists we can be sure that market would not rise away from the current levels. I have also indicated that market for the last one year would rise for 6 weeks and would spend the next 3 weeks in 100 point range there by raising for total 9 weeks and then fall like pack of nine cards for five weeks. By the current weeks we have completed 8 weeks of rise and if the trend is to be followed we should rise for next one week or so and there after we should fall for another 5 weeks at least.
It can be seen from the chart below that nifty has been moving in up or down in channels red trend lines are the channels of each rise. There have been three earlier rises and they has moved in channels and when ever it has broken the support line the markets have corrected for 5 weeks. The current rise is also moving in the channel and is above the support line indicated by blue circle and till it is above this support line then we have all the fair chances of market correcting for 5 weeks so keep a close watch on the support ling the moment it is broken we can just reverse our position.
It can also be seen from the above chart that nifty the blue line indicated by arrow is the one year trend line and it is also one of the formidable support line and it was broken only once in last one year. This along with the above support line are placed at around 5350 so any close below that would end of the current up move and we have to brace our selves to movement up to at-least 4900 levels.Positives for Nifty:
Market is above 200 day EMA.
Market has moved 50 day or 100 day EMA.
Market has moved 50 day or 100 day EMA.
DMI has moved above 20 indicating strength of bulls.
Negatives for nifty:
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 on closing basis so I would furnish the alternative structure if these are violated.
Directional Momentum index – (DMI)
Currently +D1 is above –D1 and +D1 flat indicating that bulls are at least having control of the market. As has been indicated earlier DMI has moved above 20 and is moving up indicating the strength of the bulls and till the DMI move up along with rise in market we might see a blow off rally. If DMI moved down then we can see market drifting down. In the last one years along with the rise when ever DMI has moved to 25 to 30 levels the trend has reversed whether this would happen now also we have to wait and see.
M.Sri Mahidar
Sunday 18th July 2010, Time 18.19 IST
Trend is friend
