Nifty has started the 2012 slightly weak and thereafter made a spectacular recovery and moved up and for the next three days was stuck at the high levels. This is the fourth consecutive week of close below 200 Week EMA which is a very bearish signal. Unless and other wise nifty recovers and closes above 200 Week EMA decisively there should be no hope for bulls. One of the things we have to see is the when ever a big rise is coming there is not follow up buying, but in a down move there is coming follow up selling which is clearly showing the market is in a clear bear trend and the main trend is down. So we should always try to profit from the main trend rather that the waiting to go against the trend. This week also the big move up move on Tuesday was not successfully followed up by further buying. It appears that 200 week EMA is going to be formidable resistance for the current short term up move for the market. The number of weeks it trades below 200 week EMA the bulls are becoming week. 200 week EMA is at 4851 so markets upsides might be limited to these levels. if market nears 4850, it would give a good opportunity to go short on the market with stop loss at around 4900 levels. Another thing to be noted is that 15 week EMA is about to move below 200 week EMA which is further strengthening the bears. It may also be noted that 200 day EMA is also sloping down wards and move down which is also a sign of weakness for the market and further down sides are not ruled out.
The market is formatting an another bearish formation, a heads and shoulders pattern as is indicated in the chart above. Any close below 4600 would confirm the same and we can have a healthy fall from those levels. Generally for H&S pattern the length of the heard from the neck line is the target for the H&S and the length of head is around 750 points. If H&S pattern is confirmed by break of neck line we can expect the market to fall around 750 points from the break of neck line which appears to be around 4600 at present which give a target of around 3850 levels a sub-4000 levels which I am expecting form so many months whether we achieve the same we have to wait and see. If the H&S pattern is confirmed then we can expect the target to be achieved till the pattern is negated. So the question comes when the pattern implications are negated. It can be negated when the 5400 is violated and till that time the target would be in place. But still the pattern is forming and it appears that we are in the final stages of the pattern completion. So wait patiently for completion of the pattern as it has all the potential to give a huge profit potential.
Positive for the market:
• Daily MACD is in buy mode and moving up indicating the we might see slight up move.
• Weekly stochastic oscillator is in sell mode but is about to give a buy signal indicating an up-move in coming weeks.
Negatives
• Market is finding resistance at 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 Stochastic is in buy mode but is about to give a sell signal.
• Monthly MACD is in sell mode indicating weakness in the market.
• 15 week EMA is below 50 week and 100 week EMA.
It can be clearly seen from the above that the indicators are give a mixed signal. Very short term signals are showing some what positive, but the medium term indicators are indicating down wards movement so we have to wait for the short term indicators to be in conformity with the medium term to make good profit. Till then be in a side ways market.
M. Sri Mahidar
Trend is Friend
Celebrate Life :)
Sunday, December 8th 19.30 IST
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