During the week nifty moved nowhere it opened on a weak note continued to be so and on Wednesday there was a huge green candle which made a 52 week high and on next day it opened on a strong note moved up and there after collapsed and on Friday we have seen a complete sell off, thus giving an indication that bulls are loosing ground and bears are gaining upper hand at-least for the short term. Nifty has very good support at around 5950 levels especially at 5932 any break of 5932 would take market down at faster rate. But one thing is sure till the market is above 5350 there should not be any problem for the bulls. Till it is above it we might see markets making new highs once the down ward pressure is gone. But once 5350 is broken the bulls would run for cover. Technically it appears that we might have entered into very short term weakness and after that we might see markets moving up and making a new highs. So till 5932 holds there should not be any problem for bulls in short term on for the up trend it is 5350. So better watch out for these levels.
One of the features of the current move is that this week was that this week also the market closed with a red candle indicating the bears were successful in taking the market down. This is the second consecutive week where in the market closed with red candle. Another feature which is of very important is the for the first time the market has formed a lower low after nearly one and half months indicating the bears were able to push the market to lower levels, below the previous lows. As on EOD basis we have see the markets being pushed below the previous low does indicate the we might see further down wards before the bulls gain upper hand probably at around 5932 levels. As of not 5932 is the very crucial level.
Another point to be noted is that as per time series analysis we have completed 21 weeks of continues rise which happens to be Fibonacci and market have exactly started to move down after forming a new high thus indicating that we might see further down sides at-least for short term. This the first time that market has closed consecutively for two weeks with red candles and also closed at two weeks low thus again giving an indication that we are in very short term down trend after which we might again start out journey upwards.
In my last weeks update I have indicated that we have broken the nearly 6 weeks support line and also that we have to get confirmation of the same and this week the market went up touched the trend line and there after started to move down. This is the perfect technical set up and this is giving an indication that bulls are finding it difficult to take the market up and in my view we can see market drifting towards 4932 levels.
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 is at around 80 levels indicating over bought levels.
§ + D1 as moved above -D1 indicating that bulls have gained upper hand. Weekly DMI is moving higher and has now moved above 20 presently at 24 indicating that on weekly basis the markets are gaining upper hand and any correction should be taken as an opportunity to go long in the market.
Negatives for nifty:
§ Daily stochastic is in over bought zone and has given a sell signal and moving down, and Weekly stochastic is also in sell mode.
§ The rise is on –ve divergences with MACD histogram and also RSI.
§ Daily MACD is in sell mode and is moving down.
§ Daily stochastic oscillator is in sell mode and is moving down.
§ Weekly Stochastic Oscillator is in sell mode.
Elliotte Wave Analysis:
The Elliot wave break down of the wave, from the start .i.e. from 4786 till now is given above. As of now all the waves are fitting in place. The wave structure might change on further movement of the market. it appear from the above that the 5th wave appears to be the longest. If the fifth is the longest it denotes that the 5th wave extended. And the fifth wave is the extended the 5th wave of the 5th should also be extended. If the 5th wave is extended then the length of the fifty wave would be at-least the total length of the 1 to 3rd wave added to the end of the 4th wave. Here on higher note the length of 1st to 3rd happens to be 667 points. So the 5th wave should be at-least 667 points from the end of the 4th wave which happens to be at 5348 so the minimum target of the fifth wave is 6015, the market has moved above it so the next target should be around 161.8% which happens to be around 6427(a new high) and the maximum length of the 5th wave cannot exceed beyond 261.8% so the maximum target should be 7094, not a one point more.
Now we proceed to study the pattern in lower structure. The wave-v started from 5348 and the break up is given in the above chart and if we assume that the 5th wave is extended then the 5th of the 5th should also be extended. Here if the 5th is extended it should be at-least of length of 1to 3rd wave. The length of 1 to 3rd wave is around 684 points so the length of the 5th wave should be of length 684 points from end of 4th wave( which is at 5932) so the minimum target should be 6616 whether we achieve the target or not only market would tell. In lower wave structure if the market moves below 5932 this would not hold good and I have to alter the wave structure which I would do when the event happens. Till then this wave structure holds good.
Directional Momentum index:
+D1 is above –D1 and is moving up and also DMI is place at above 40 at 46 so we might see very very swift movement in the market. Also DMI has moved above +D1 indicating that bulls are gaining in confidence and we can see healthy movement in coming weeks. One negative feature of the DMI this week is the +D1 is moving down and –D1 is moving up and also DMI is moving down which does not augur well for the bulls. So we might see some pressure on the bulls in the coming one to two weeks.
M.Sri Mahidar
Sunday 17th October 2010, Time 19.27 IST
Trend is friend
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