Weekly technical Analysis for week ended 21^st January 2012.

The movement of nifty during the last two weeks, have surprised by everybody and bulls have been laughing all the way to the banks. Historically January has been a good month for the bears. As I have said earlier first half was good for bulls and the second half good for bears. But this time it appears that its bulls all the way. The movement of the market is clearly indicating that bulls are showing strength as every small fall has been bought into. It may also be noted that the volumes have also increased in the current rise compared to other rises. You might have been getting an question “have we started a new bull run?” I don’t think so as technicals are not pointing towards that. But nothing can be ruled out as subsequently everything might rosy. But till not the road was smooth for the bulls and now they are approaching the very rough road where every time they have lost to bears. 5150-5300 has been a formidable resistance for the bulls to barge through. Will this time be different, only time would tell? You might be wondering why I am leaving it to time. As I always say price is king and we have to believe the price whatever might be your interpretation of the market technically. Till now market has not formed at-least a higher high to give an indication for their strength. One of the positive things about the market is that it have broken and moved above the 50 day EMA and also above the 100 day EMA this is generally indicates strength. But is now approaching the 200 day EMA which happens to be around 5150 levels, during the last one years or so when ever market has approached or broke above it, the markets fell very swiftly. So we have to see whether the 200 day EMA resistance still exists. Another thing to be noted is that the 50 day and 100 MA are moving down and still to turn up. This still indicates that we may not still be out of woods. We would see it in the oscillator section when we come there. One of the other things to be noted is that we are nearing the sloping trend line drawn from the top of November 2010 and during the last 14 months we are have been facing resistance from the trend line will this time also it would offer resistance? We have to wait and see. One thing which is worrying me is that

If we apply time periods to the markets some interesting things are coming into place which we would be now discussing. Nifty made a top on 8^th of November 2010 and from then onwards it have been consistently falling. Now we have completed 14 months and now into 15 months and if we go by the Fibonacci time periods we have to go to next Fibonacci number i.e. 21 to complete it. It indicates that we have all chances of market moving down or consolidating at-least for another 6 months. Whooooooo that’s a long period considering the correction till now. Will that happen? It seems to be so. But there is a catch here. Market made a bottom at on 20^th of December and there after started to move up. December has completed exactly 13 months and market has started to move up, did we start the up move? Only god knows, and time would tell. So have patience time would tell everything. If nifty fails to go past 5200-5300 levels then we can be sure that we might be in for correction for another 6 months the would be a long wait for bulls but after that we can see a nice decent up move in the market.

It can be seen in the above chart that nifty has been finding support at the base line and resistance at the top line. It is around 5300 level. If nifty fails to move past it then we can see it heading towards the base line which happens to be way below 4500 levels. Also see the another trend line drawn from the top of the august 2011 top where in the nifty failed to go past this trend line at-least three times earlier and now it is approaching the same line. So it seems the coming weeks or month would be testing time for bulls and also an extreme test of strength. If they come out successfully then we can see market just running away from bears hand and if dose not then bears would have a field day. One thing is sure we have a big move in either way. So be prepared for it.

M. Sri Mahidar

Trend is Friend

Celebrate Life J

Sunday, January 22^nd 16.31 IST