Nifty opened on a weak not on Monday and continued thorough out the week and finally closed on a positive note on Friday. During the last two days of the week bears have tried their best to take the market down but bulls have provided support a the lower levels i.e. there is substantial buying which is coming into the market. The power of the bulls at-least for the short term is visible by the long tail indicated in the chart. The long lower tail indicates the strength of the bulls. Considering this it appears that atleast for the shorter term 4766 would provide support for the market and if it is taken out then we have next support only at 200 day EMA. One of the noticing features of the market this week is that it has formed a lower low. This is the first time in the last 11 months that nifty has formed a lower low and this indicates that weakness has set into the market and further lows are not ruled out. So as on now unless and other wise market makes a new high this is not violated. Another noticing feature is that nifty has broken the trend line drawn from the lows of May 2009( low made just before election result) indicating weakness in the market, nifty has to move above the trend line to indicate strength of the market. As of not the market appears to be in extremely oversold position and for the short term it appears that the market is poised to move up. It may be noted that generally whenever long term trend line are broken on upsides or down sides, markets/stocks generally recover and move near towards trend line and then fall very fast. Considering this we might see nifty moving towards the trend line and then fall. Currently trend line resistance appears to be around 5050 levels and nifty has all the chances of moving near that level. So if nifty moves near 5050 or just above 5000 we can see for a very good shorting opportunity if the market turns down with stop loss at the resistance line. So market is just proving an opportunity to go short on rise. Another point to be noted is that a week previous nifty has moved down below 15 day EMA and during the week it has moved blow the 100 day EMA indicating good amount of weakness. Nifty has moved above 100 day EMA in April 2009 and till not has not moved below it at-least for one day. And currently 100 day EMA has not offered any resistance and nifty broke through it easily and also stayed below it for three days indicating that the break out might be successful. Till now 100 day EMA was forming a support and now it would offer good amount of resistance, 100 day EMA is present around 4950 levels. So any movement near 4950 levels should be seen as a suspicion. There are some cases where in market move just above the MA and then fall. So any movement of nifty above 100 day EMA and then breaking below it should be taken excellent shorting opportunity.
I have been indicating form the last two months that market has unique habit of correcting in the just after 11 months and 11 months have completed on 15th of January and you see the result markets have corrected. So we cannot ignore the correction this time. As far as the market is concerned any rise of the market should be taken as a opportunity to book profit and stay in case as in future we might get very good opportunity to enter into the market. So trade or invest accordingly.
Nifty is also below 15 day EMA, so all the raises should be taken as an opportunity to go short with stop loss at 15 day EMA. 15 day EMA is at 5065 and till market trades below that level the trend can be seen as down.
Positives for Nifty:
• Market is above 200 day EMA.
Negatives for nifty:
• Nifty is below 1 5 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.
• -ve Divergence in RSI on weekly and daily charts.
• 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
It can be seen from the above that all the positives have gone and we are seeing the negatives are increasing indicating that bears are just gaining upper hand in the market.
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.
Directional Momentum index – (DMI)
DMI indicates the strength of the current trend whether up or down. During the last few week –D1 moved above +D1 indicating strength of bears. But during the current week it has moved above 20 and moved very swiftly towards present 27 indicating that the trend is gaining strength. 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. The movement of DMI swiftly above 20 is indicating that the intensity of fall might increase in future periods.
M.Sri Mahidar
Sunday 31st January 2010, Time 14.40 IST
Trend is friend
