Nifty opened on a weak note and moved down and touched the support zone of 5350 and there after bounced with a vengeance. I have indicated in my last weeks update that 5350 is very crucial support level and bears can be sure only below it. Nifty exactly bounced at that level in-fact it made a low of 5348 and bounced from there thus indicating that bulls are still in control of the market and further upsides are not ruled till 5350 is not taken out at-least for the time being. On going forward the level might change but as of now 5350 is the levels which bulls have to defend. The recovery of the market during the last weeks indicate that further upsides in the market are not ruled out. The recovery would be genuine if the market is able to close above its 52 week high in the coming weeks. if selling pressure comes and market is not able move above 5600 then market would again look for its support at 5350. So as of now 5600 on upper side and 5350 on the lower side are the two levels to be watched out. Any breach of these levels and also close above or blow these levels would indicate either a good move on upside if 5600 is successfully breached and any breach of 5350 would result in healthy fall.
By The completion of this month i.e. august we have completed 18 months of rise, and we are into 19 months, and the next immediate Fibonacci happens to be only 21. So as far as time series analysis is considered, nifty has all chances of moving up or staying at these levels for another three months including this month. As far as Fibonacci time series analysis is considered we can see a good correction only in the month of December 2010 or January 2011. Historically September has been good months for the bulls if we see from 2003 onwards all the Septembers have closed in green and has made a surprisingly 52 weeks highs except 2008 where in it has made 52 week lows. So if we see historically we should have good month and possible 52 weeks high. Whether history would repeat itself or defy it we have to wait and watch.
As far as the current rise from may lows are considered, we are into 15th week and the next immediate Fibonacci is 21, will we see the market raising for another continues 5 weeks. for me it appears not to be like that if market is not able to make a new high this week or in coming two weeks. Why? If you see the current up move from may 2010 the market has rise for 13 weeks and after that corrected in 14th week and we have now completed 15 weeks. so till it makes a new high nothing can be said bout that.
This time I would be furnishing a interesting observation, which is in place for the current rise from March 2009 onwards. You might be thinking what it is? It has been observed that nifty has been rising continually for three months and then corrects for one month and then again raises for another three months with exeption of November, December 2009 where in it has risen for two months only. The same is depicted in the chart below.
If we observe the chart there is interesting phenomenon developing, we can clearly observe that first the market has rise for three months and corrected for one month, then again risen for three months and then corrected for one month, next risen for three months and a gain corrected for one months and again the current rise from may 2010 we have completed 3 months and we have just entered 4th months prompting us to estimate that we should correct to keep the sequence in place.
Another thing to be observed in the chart is that there is some sequence being followed which is 3-1-3-1-2-1-3-1-3(current), the blue one are rises and the black ones are fall. It can be seen that in the beginning two rises for three months and then the subsequent rise was for two months and there after another two rises are for 3 months each. If we go by sequence then we can see the market correct for one month and there after rise for another two months there by completing a Fibonacci of 21 months. So we have to see whether the same would be followed or not. One thing is sure that when ever the fall happens for two consecutive completed months then we can be sure that correction has started till then bulls enjoy the market.
Positives for Nifty:
§ Market is above 200 day EMA.
§ Market is above 50 day or 100 day EMA.
§ 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 as moved above -D1 indicating that bulls have gained upper hand and only now DMI should start moving up to indicate strength of bulls. The slackness of DMI is indicating that bulls lack strength as of now.
M.Sri Mahidar
Sunday 5th September 2010, Time 20.12 IST
Trend is friend
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