Weekly technical Analysis for week ended 6th July 2011.
This week nifty opened on a slightly strong note and there after tried to recover the gap down opening of previous week and it failed to achieve the same and there after started to correct on a heavy note and it closed below 5400 which was very important psychological level and there after continued to slide and Friday was the “D” day and it opened with a huge gap down nearly 120 points and there after moved below the 5200 mark which was also a very psychological levels for market participants, and it closed above it. But as of now 5200 has lost it advantage and it has not shifted to 5400 and the close below 5400 has confirmed the down ward trend. One of the noticing features of the current fall are being furnished below
i. Nifty have made 52 week low on closing basis and also intraday basis for the first time after October 2008 on the day of the trading, which clearly indicates that weakness for the market and which also gives an indication that further down sides are not ruled out in the coming months as generally when 52 week low is made after long time the trend continues for some time before reversal happens. So brace up for further down sides in coming months.
ii. Nifty has failed to move above the 200 day EMA thrice in last two months and then collapsed indicating that bulls are not strong and bears were successful in defending the territory.
iii. Nifty has broken below the two years trend line at the first day of the week and there after started to move down. The break of the two year trend line is a clear indicating that we are in for trouble and we can easily move down very very violently. So brace up for the same till the reversal is indicated by charts.
iv. Nifty also seems to have formed a Heads and Shoulders pattern over a period of last two years. and this year it has broken below the neck line and have moved down with heavy volumes which is a clear indication that it has confirmed the same. The targets for the same are very very bearish and are given below in the following paragraphs after these points.
v. Elliott wave is also painting a very bearish picture. It has been doing for some time and it appears that price has not started to be confirming the same. The Elliott wave is not pointing towards a very bearish picture and the targets for the same are being given in the elliotte wave analysis below
Last week I have indicated that we are on the verge of break of the neck line of the heads and shoulders pattern. this week it has broken the trend line and also closed on weekly basis below it for the first time in last two years. The close below it is a clear indication of weakness in the market in the coming months. Till the neck line is conquered by bulls the targets of the H&S cannot be ruled out. Now you might be wondering what the target would be. As per the H&S pattern the target would be arrived at by the height of the head and in the preset case is around 1400 points so the target for the same comes to around 4000 for nifty. So brace for it. it now appears to be improbable but if the neck line is not conquered then we can expect the target to be achieved.
Positive for the market:
Nil
Negatives
· Nifty is trading below 15 day, 50 day, 100 day and 200 Day EMA.
· 50 day EMA is below 100 day EMA is below 200 day EMA indicating extreme weakness.
· Daily and weekly MACD is in sell mode,
· Daily and weekly stochastic is in sell mode.
· Monthly MACD is in sell mode indicating weakness in the market.
The above is indicating an extreme bearishness in the market . one of the noticing features of the current fall is that all the oscillators are have just give a sell signal and they are also not in oversold levels which is clearly indicating that further down sides are not ruled out.
Elliott wave analysis:
In previous weeks I have indicated that we might be forming an expanding triangle and it appears that we might have completed fourth wave and it appears that we have started the fifth wave and it appears as per the current wave structure and we might have completed the 1st wave of the fifth wave and it appears that we might have completed 2nd wave of the 5th wave and it seems that we might has started the 3rd wave of the 5th wave and generally the 3rd wave would be most violent and devastating and the longest, which is being indicated by gap down opening. The first wave of the 5th wave was around 750 points and the second wave was nearly 61.8% of the first wave and wave would normally be at-least 161.8% of the first wave so we have chances of correcting around 1250 points from the end of the second wave of the 5th wave which happens to be around 5700 levels giving us a target of 4500(o no) we might doubt this target but if the pattern is correct then we have all chance of correcting. The this pattern is pointing towards a very weak picture. So we have to wait till the pattern is negated till then we can hope the targets to be achieved.
Generally in Expanding triangle pattern the fifth wave goes near or below the trend line and the low the trend line is more frightening for bulls around 3800 levels really scary. Nearly 80-90% of the time it happens. So till it is proved otherwise we can expect these levels. or till EW pattern is violated b movement above 4th wave. The latest wave count is give below J
Updated wave count is give below:
The target for the expanding triangle now appears to be around 3700 levels which also happens to be 61.8% retracement level of the entire rise from march 2009. So will we achieve the target Elliott wave says so. I have been giving this target for some months now. Till the market proves other wise the target would be achieved eventually. There is 80% probability of achieving the target. So brace up for the bear market in coming months or till the price confirms the reversal of the trend.
M.Sri Mahidar
Trend is Friend.
Sunday, August 7th 15.00 IST
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