nifty weekly update

Weekly technical Analysis for week ended 14th August 2011.

WISH YOU ALL A HAPPY INDEPENDENCE DAY

Nifty opened this week with a gap down and also the following day with a gap and there after recovered in next two days to be sold off on Friday. During the week market formed a star as per candle and stick parlace. The pattern indicates a fierce battled between bulls and bears and finally not movement either way and we have long upper tail and also lower tail which indicates that bears tried to take the market down but bulls made sure that market does not stay at the lower levels and take the market up and bears makes sure that market does not stay at higher levels push the market down result no direction for the market. Now the coming weeks would tell which way the market would be taken. As this pattern has formed while falling it clearly indicates that it’s a pause in a fall and after some time market has all chances of eventually moving down but wait for market to confirm. One of the negative features of the last week is that bears were successful in making market closing below 5200 which is a bearish signal. Over a period of last six months market has been finding support at 5200 and this week market has successfully broken below it and during the entire week it failed to move above it which is a very weak sign. On the noticing features of market during the week is that market even though opened below 5000 on Tuesday but immediately recovered and closed above and was able to maintain above it indicates that bulls have successfully defended psychological level of 5000 and any breach of the same this week or coming weeks would take the market further below. Now we have to wait for the market to close below 5000 first on daily basis and second on weekly basis to indicate further weakness.
Positive for the market:
Market has defended 5000 level.
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.

This week I would be explaining the market as per point and figure charting. This I have explained long back and now I would be furnishing P&F as there happened an important event as per this and it’s a very bearish pattern. That is the reason for me to present here the P&F charts. Point and figure shows only demand and supply and it does not take into any oscillators so it is the best indicator of trend reversal. When supply increases it reverses from bull to bear market and when demand increases it indicates reversal for market from bear to bull market.
The point and figure chart is given below, the chart is of weekly basis.

The one indicated by big blue circle is a pattern know as triple bottom break down formation. This is a the power trend reversal indication. And also see that nifty has broken the trend line (blue line of last three years in June 2011 and failed to move above it in July and august. It may be noted that in point and figure charting trend line is drawn at an angle of 45 degrees from the low of the market in a raising market and not joining all the bottoms so the break of trend line in P&F is the most powerful reversal indication rather than in traditional method where trend line is drawn joining previous lows. You can see in the above chart that from 2008 onwards the trend line was not broken or even touched but in June 2011 is successfully broken the same. but if you have see in the traditional method it has broken number of times. So the break of the trend line followed by triple bottom break down formation is a power full reversal indication and it clearly indicates that selling pressure has taken over the market and surely further down sides are not ruled out. one of the noticing feature of P&F figure patterns is that it also gives the probable target for the break down and in the present case the target is 1500 points from 5700 levels so the target comes to around 4200 levels. it seems to be distant now but if the red trend line in the chart is not take out successfully in coming months then we have all the possible chances of achieving the target.
You can also see the small blue circle which is drawn at the 2009 bottom at the right hand bottom of the chart . Notice nifty has formed similar pattern and triple top break out formation has happened in march 2009 and you know what has happened to the market after that. I have given this to give you an idea about how powerful the pattern is. This time triple bottom break down has happened and till reversal of the same happens the selling pressure happened and till buying pressure emerges and market moves above 5700-5800 levels.
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. 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:

It appears that as we are in the fifth wave for the expanding triangle formation. And we are in the third wave of the fifth wave formation. It appears that we might see the fifth of the fifth wave to be extended and if that happens then the pace of fall would increase once we start the fifth wave. As per the updated wave pattern it appears that we might have completed the fourth wave of the third of the fifth wav and we might have all chances of the fifty wave of the third may move below the low of the three. So we have all chances of seeing sub-5000 levels in coming weeks. So brace for it.
M.Sri Mahidar
Trend is Friend.
Sunday, August 14th 20.26 IST