Weekly technical Analysis for week ended 9th September 2011.
The beginning of the week the market was strong and continued to move up and the end of the week especially on Friday indicated a weakness in the market and possible down sides on the coming weeks. Last week I have indicated that we can see selling pressure coming into the market at around 5200 levels and you can see that the market made a high of 5169 which is virtually nearly 5200 so it seems that technicals seems to be working for the market. Nifty has found support at around 5200 for nearly six months and last month it broke below it so now we would be getting resistance at those levels. So now we can see selling pressure at 5200 level. Any weekly close above 5200 would be a significant event for bulls. So as of now till 5200 is taken out bulls would not have comfort. As nifty has failed to move above 5200 we have all possibility of nifty moving towards 200 week EMA which happens to be at around 4800 level. Will we be seeing nifty moving down to those levels in coming weeks? Wait and watch.

It can be seen from the chart that nifty is finding resistance at around 5200 levels. There are two events that are giving resistance and why 5200 is so crucial. First you see the red ling the ling at 5200 has offered support twice and in august it broke indicating that It would offer resistance when the market moves near it and it happens to have happened now. So as far a technicals are concerned we can see nifty moving towards 4800. Another thing to watch out is that nifty has formed a head and shoulders pattern and broke the neck line in august as the H&S pattern has been formed over a period of nearly 24 months, we should have more than one reason to expect the neck line to offer resistance and it also seems to have offered resistance. The resistance line at around 5200-5300 levels. It’s a classical H&S pattern and if history is considered after breaking the neck line it moves up to or near the neck line and then the fall would be more violent that the earlier one and fall as the faster rate. So we can expect some bad days or weeks for the bulls. So be braced for it.
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 latest wave count is give below 
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 might have completed the 4th wave of the third of third and we might have started the fifty wave of the third and the target for the same comes to atleast around the low of the august so will be reach the target. Wait and watch. 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 fifth 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 11th 21.16 IST