nifty weekly techncial update

Weekly technical Analysis for week ended 6th February 2010.

Movement of nifty during the week was on expected lines. Nifty opened on weak note then slightly gained strength and there after collapsed on the last two days of the week. One of the noticing features of the week is that nifty move up and found resistance at 100 day EMA and then collapsed towards 200 day EMA. Failure of nifty to move past 100 day EMA is an indication of weakness of the market and as of now 100 day EMA would offer resistance for the future up moves. So as of now 100 day EMA would be the major hurdle to break which happens to be at 4934. It is the first time the nifty has moved below 100 day EMA after moving above it in last week of March 2009. If seen historically for the last five years it can be seen that whenever market has moved below 100 day EMA it stayed below it for at-least 5 to 6 months and in 2008 it stayed below 100 day EMA for 15 months. Considering this we can assume market staying below it for at-least next 6 months so we can assume the market moving downwards at-least upto July 2010 so just wait for the market reversal to make money. The movement of market below 100 day EMA after March 2009 i.e. after nearly 11 months is a clear indication that markets have turned weak and they are further poised to move down. One of the noticing feature movements during the last two weeks is the 15 day EMA has moved blow 50 day EMA for the first time after March 2009 indicating weakness. During the last fall when ever 15 day EMA has moved below 50 day EMA nifty has fallen by at-least 1200 points. Going by this we should seen nifty falling at-least 1200 points from current levels so we should easily fall to 3800 levels.
One of the noticing feature of the this week’s fall is that nifty has take support at just at 200 day EMA. 200 day EMA happens to be at around 4650 and nifty has now made a low of 4692 during the week. During the last fall in January 2009 nifty took support at 200 day EMA for nearly two months and then collapsed. Now we have to see whether the same would happen this time also. Generally history repeats itself and in technical analysis it has proven correct most to the times. So this is the case we might see the market moving between 100 day and 200 day EMA for at-least for next one month. So we have to prepare for the same.
Nifty is still maintaining below 15 day EMA which is giving an indication that at every rise we should sell. 15 day EMA happens to be at 4950 so till market is below that we should see for an opportunity to short the market. It may be noted that 100 day EMA is also at 4935. Any rise of the market from current levels should find resistance at 4950 levels. so there are the levels where in the markets would reverse. So keep a close watch when the market reaches these levels.

It can be seen from the above weekly chart nifty has formed three black candles, the pattern is known as “Three Black Crows” in Candle and Stick Parlace Generally a sign of extreme bearishness in the market and it does not require confirmation. On of the noticing feature of the pattern is that once the three black crows is that market generally recovers 50 to 61.8% of the fall and then tanks viciously. Considering this we can assume market might rise around 300 points from low of 4692 and then fall so we might see market moving towards 5000 and then fall. So keep a watch on the same.
Market technically is in an extremely oversold condition and historically when it has gone to such over sold levels markets of bounced back with vengeance and then collapsed. So this is also pointing that we might see nifty might moving up in the coming week. So be prepared for it.
Positives for Nifty:
• Market is above 200 day EMA.
Negatives for nifty:
• Nifty is below 15 day, 50 day and 100 day EMA.
• Nifty has also moved below the 15 week EMA for the first time in last 11 months.
• Daily MACD is in sell mode.
• Weekly MACD and TRIX are still in sell mode.
• DMI has given a sell signal and has moved above 20 indicating that the down ward movement has set in and further downs sides are not ruled out
Elliott wave analysis:

As per Elliott wave it appears the trend might has turned down and we might be heading down wards. I have indicated in my earlier monthly analysis the probable alternatives and in the next week I would again give the probable formation and structure and the targets. But today I would be giving the minimum targets which markets have to achieve if the reversal is correct. As per the Elliott wave if market is correcting the entire rise from March 2009 then we have the minimum target of 4650 and in my view it should be 4246 which is the 38.1% retracement. If we seen historically nifty has corrected anywhere between 50 to 61.8% when the nifty has corrected after substantial rise. so the total rise of nifty is around 2800 points so we might see a fall of either 1400 points or 1730 points thus giving a target of 3900 and 3500 so we have still a way to go before market reverses. The two probable patterns which I have indicated nearly three months back would again be discussed in next week’s update with probable targets. At present these targets appears to be impossible and history has shown that these targets are finally met.
Directional Momentum index – (DMI)
DMI indicates the strength of the current trend whether up or down. Presently –D1 is above +D 1 indicating the strength of the market. DMI has moved above 20 during last week and it has moved from 27 to 34, movement above 30 has further strengthened the strength of the bears and we can safely assume that further swift fall are not ruled out. As the current trend is down it indicates that strength of down trend is increasing and bears are gaining upper hand and they would further push the market down.
Pivot Point Trading Strategy:
Pivot point for the next week is around 4787 if nifty fails to move above this we have fair chances of seeing 4623 and 4528 if 4787 is taken out then we can see 4882 and 5046 so trade accordingly. Monthly pivot is around 4983( which might offer some resistance) if nifty fails to move past during this month we can see 4665 and 4448 so trade accordingly.
M.Sri Mahidar
Sunday 7th February 2010, Time 17.02 IST
Trend is friend