Sunday, September 4, 2011

Weekly technical Analysis for week ended 3rd September 2011.
Last week was truncated week and it was eventful to the bulls. The market opened with a gap up opening and continued to move up during the entire week. During the current weak nifty moved nearly 300 points from the earlier weeks close. The rise during the week was too fast to be comfortable to the week. The virtual straight rise of the market is raising doubts on the strength of the rise, and pointing towards short covering rally rather than genuine buying. First indication of the strength of the market would come on weekly close above the 5200 and would be confirmed on close above 5700. So till 5700 is taken out the down side is not ruled out. So don’t be carried away by the movement of the current week. One of the noticing features of the current weeks movement is that nifty has moved above the 200 weeks EMA and bulls have proved that they are still holding strong and till its take out the range is limited to 4800 to 5200 and any change of range expansion would come only on these limits being taken out. So keep a watch on these limits carefully.

Positive for the market:
• Nifty has moved above 200 week EMA.
• Daily MACD has give a buy signal
• RSI has started to move up from oversold levels on daily charts.
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.
• 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.
Elliotte 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. So now we are near the target so Elliott wave has again played its part.


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.



The updated wave structure is given in the chart below. Last week I have given three options and it appears that one option has materialized and which is given below. As per Elliott it appears that we are still in formation of third wave it appears that we have completed the third wave of the third during last week and we are in formation of 4th of the third and after which fifth of the third wave would be start which has all chances of moving below the low of the third wave which happens to be below 4700 which itself is nearly 350 points from current levels. The completion of the fifth wave of the third would result in completion of the third of the fifth wave and after which the market would turn up very vigorously towards atleast 5200 levels and from there the fifth of fifty would start and as per the expanding triangle the fifty wave should be more devastating of the all waves so that would happen or not we have to wait and watch. So Elliott is telling that its still not time for long time investment in stocks. So just stay in cash.



M.Sri Mahidar
Trend is Friend.
Sunday, September 4th 19.12 IST

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