Weekly technical Analysis for week ended 14thAugust 2010.
Nifty has behaved in a in a peculiar way it has opened on a strong note on Monday and moved up and there after for the next three days fell sharply and on Friday recovered swiftly to closed the week on positive note. As per candle and stick parlance it has formed a star indicating indecisiveness in the market. It gives a clear indication that there is a clear fighting going on between the bulls and bears and they are not in a position to determine as to who is stronger. Who ever emerges stronger the market would go in that direction in a very very big way and also very swiftly and it might take every body by surprise. The odds are in favor of the down ward movement of the market. Now presently for the last five weeks nifty is stuck between ranges of 5350-5500. So it clearly states that market has moved nowhere and it is very very disgusting for the trader when markets moves in such a narrow range. It clearly states that the trader should immediately book profits in such range bound market as the market might reverse in a very short period. So as of now any movement of nifty above 5500 and below 5350 would result in that direction other wise we have to again stay in this range for another week. The real action was out side the market where very very steep rises were noticed randomly. First Tata Motors has moved up sharply after it results and there after SBI went into frenzy mode once it released its spectacular results. In the present scenario it appears that the market is being clearly operated as one stocks moved in a frenzy mode and after two or three days another stock moved up in a frenzy mode. Generally as has been observed in the past such type of movement takes place when market is nearing tops. If the market does not correct from current levels such type of frenzy moves may be seen in some other big cap stocks and there after market might also move in such a frenzy way to catch the retail investors again and fall there after very violently there by again catch the innocent retail investors. If we see the movement as on march, April 2009 and now, in 2009 the stocks were moving up steadily up and if we observe we can clearly see that stocks are raising by 20-30-40% terms in three to four days there by resulting in break out phenomenon but they ultimately they correct to the break out level. During the last one month or so we can see so many stocks which are raising vertically and that too with heavy volumes. So the break out of so many stock with vertical rises is a red flag as the same thing has happened in December 2007 giving an indication of break out and there after proved to be a false break out. So it is better to be cautious of these vertical rises.
If you observe divergences between the indices, this is quite alarming. As per Dow Theory when there are divergences between the indices then it is an indication that there is something wrong in the market and we should become cautious of our actions, but generally every body is carried away by the movement of the market as a whole. It can be seen or you might have observed over the last one month that where as Nifty and Sensex has not moved any where that is nifty is stuck in the range of 150 points and sensex in range of around 400 points. Bank nifty, and Cnx mid cap and nifty junior has been continually moving up making new 52 week highs. All these three indices have moved around 10% where as the major indices have not moved ever around 3% there by indicating a clear divergence. Generally these type of divergences happen at market tops or at bottoms. If you observe the markets movement in December 2007 and January 2008 these three indices were rising at a steeper rate than that of nifty and sensex and we know what has happened after that. If you observe the same in March 2009 these two indices were making a new 52 week now where as nifty and sensex did not make new lows and there after the markets rose and you also know what happened there after. It appears as of now that every body is ignoring the divergences between the indices and is slightly carried away by the general market movement. DOW Theory is saying or indicating us to be cautious. Bears need not also rejoice also as till now market has not given any reversal signals (faster retracement of the last wave) in their favor till that happens the market is in the hands of bulls. So bears have patience.
Nifty has behaved in a in a peculiar way it has opened on a strong note on Monday and moved up and there after for the next three days fell sharply and on Friday recovered swiftly to closed the week on positive note. As per candle and stick parlance it has formed a star indicating indecisiveness in the market. It gives a clear indication that there is a clear fighting going on between the bulls and bears and they are not in a position to determine as to who is stronger. Who ever emerges stronger the market would go in that direction in a very very big way and also very swiftly and it might take every body by surprise. The odds are in favor of the down ward movement of the market. Now presently for the last five weeks nifty is stuck between ranges of 5350-5500. So it clearly states that market has moved nowhere and it is very very disgusting for the trader when markets moves in such a narrow range. It clearly states that the trader should immediately book profits in such range bound market as the market might reverse in a very short period. So as of now any movement of nifty above 5500 and below 5350 would result in that direction other wise we have to again stay in this range for another week. The real action was out side the market where very very steep rises were noticed randomly. First Tata Motors has moved up sharply after it results and there after SBI went into frenzy mode once it released its spectacular results. In the present scenario it appears that the market is being clearly operated as one stocks moved in a frenzy mode and after two or three days another stock moved up in a frenzy mode. Generally as has been observed in the past such type of movement takes place when market is nearing tops. If the market does not correct from current levels such type of frenzy moves may be seen in some other big cap stocks and there after market might also move in such a frenzy way to catch the retail investors again and fall there after very violently there by again catch the innocent retail investors. If we see the movement as on march, April 2009 and now, in 2009 the stocks were moving up steadily up and if we observe we can clearly see that stocks are raising by 20-30-40% terms in three to four days there by resulting in break out phenomenon but they ultimately they correct to the break out level. During the last one month or so we can see so many stocks which are raising vertically and that too with heavy volumes. So the break out of so many stock with vertical rises is a red flag as the same thing has happened in December 2007 giving an indication of break out and there after proved to be a false break out. So it is better to be cautious of these vertical rises.
If you observe divergences between the indices, this is quite alarming. As per Dow Theory when there are divergences between the indices then it is an indication that there is something wrong in the market and we should become cautious of our actions, but generally every body is carried away by the movement of the market as a whole. It can be seen or you might have observed over the last one month that where as Nifty and Sensex has not moved any where that is nifty is stuck in the range of 150 points and sensex in range of around 400 points. Bank nifty, and Cnx mid cap and nifty junior has been continually moving up making new 52 week highs. All these three indices have moved around 10% where as the major indices have not moved ever around 3% there by indicating a clear divergence. Generally these type of divergences happen at market tops or at bottoms. If you observe the markets movement in December 2007 and January 2008 these three indices were rising at a steeper rate than that of nifty and sensex and we know what has happened after that. If you observe the same in March 2009 these two indices were making a new 52 week now where as nifty and sensex did not make new lows and there after the markets rose and you also know what happened there after. It appears as of now that every body is ignoring the divergences between the indices and is slightly carried away by the general market movement. DOW Theory is saying or indicating us to be cautious. Bears need not also rejoice also as till now market has not given any reversal signals (faster retracement of the last wave) in their favor till that happens the market is in the hands of bulls. So bears have patience.
Positives for Nifty:
§ Market is above 200 day EMA.
§ Market is above 50 day or 100 day EMA.
§ DMI has moved above 20 indicating strength of bulls.
§ Weekly MACD is in a buy mode.
§ Weekly RSI has started to move up sharply indicating strength of up move.
Negatives for nifty:
§ The rise is on –ve divergences with MACD histogram and also RSI.
§ Daily MACD has given a sell signal
§ +D1 is moving down sharply and –D is moving up sharply indicating that bears are started to have upper hand and also
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 now one is violated and we have see whether the second one would be violated. This time it has failed to achieve the same.
Directional Momentum index – (DMI)
Currently +D1 is above –D1 and +D1 and +D1 has started to move down sharply and –D1 is moving up indicating the bears are gaining upper hand swiftly even the DMI has Started to move down indicating that bulls are loosing ground but still have upper hand..
M.Sri Mahidar
Sunday 15thAugust 2010, Time 19.16 IST
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