Nifty during the week has been in a very close band of nearly 120 points. It opened at 2872 made a high of 2873 and low of 2752 and closed at 2843 there by resulting in loss of 31 points from previous weeks close. Nifty is refusing to go above 2880 and go below 2750 there by it is stuck between these two limits. It appears the selling pressure is coming into nifty when ever it goes near 2880-90 levels and when ever it reaches 2750-25 level buying is coming into the market. But volumes have been the disappointing of all the movement of nifty is on very thin volumes indicating lack of direction for the market. Low volumes and also tight movement on nifty in very narrow band is giving an indication that we might be in a triangle and also might be in the last leg of the triangle on completion on which we might see a big movement in nifty. The movement might be in the range of at-least 400-500 points. The lack of interest and the direction is also the peculiar feature of triangle. Generally during the beginning of triangle there is huge volatility and volumes and as it nears the completion, there is complete lack of direction, volumes and also every body gets bored by the slow movement of markets in either direction and suddenly the market take a direction and move in one direction with huge volumes and then we should trade or invest in that direction. One thing is sure till market is above the bulls are having upper hand and the region between 2800-2750 appears to be no trade zone and below 2750 bears should have upper hand and it is better if we trade accordingly. One point which may be noted is that during the formation especially the end of the triangle trading in options is not recommended as the market does not move in one direction we will be going on loosing money in options. So it is better to trade as indicated above. One point to be noted is that nifty has again gone below the 20 day EMA indicating that bulls might be gaining strength shorts if any may be closed. The 20 day EMI is placed at 2820 any move below that should be good news for ears of bears.
Elliotte Wave Analysis:
From last few weeks I am discussion two options one being triangle and other being a flat. Both of them neither are nor ruled out as of now and it appears it is in favor of triangle.
As can be seen from the above chart nifty appears to be forming a triangle and we are nearing the completion of same. So better watch out. Last week I have indicated that we might be in the “wave-e” the last wave of the triangle and if has all the chances of retracing 50% of the “wave-d” and the 50% retracement is placed at 2901 and if nifty goes above 2901 and then breaks below 2901 then we can coolly short nifty with stop loss at 2901 or the high above 2901 as per your comfort. Any close below 2700 will confirm the completion of the triangle.
Flat:
As has been discussed in my update two week back also holds good now also. In this case flat appears to have completed at 3147 which also signaled the end of wave-4 one high wave structure and we see to be in the final wave-5 after completion of which we might see a good news for bulls as nifty might at-least recover 50% from those levels. It also appears from the chart that we might be in the wave 2 of the wave-5 and wave-2 appears to be forming a flat and after completion of flat (wave-2) we might see wave-3 of wave 5. Generally wave-3 will be violent of all the waves as it will result in high erosion of capital. In my opinion we might be just near completion of wave-2 of wave-5.
Directional Momentum Index (DMI)
During the week DMI has slightly corrected from18.83 to 16.42. But still we are in –ve break our as –D1 line is still above +D1 and –D1 is flat and also DMI is moving down indicating that the up move is lacking strength at this point of time. DMI is also indicating that nifty either movement is directionless. We have to watch out for movement of DMI above 20 for any strength of the direction.
Resistances: 2901/2950/3000/3147/3250
Supports: 2800/2750/2661/2570/2503/2223
M.Sri Mahidar
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