Sunday, February 13, 2011

Nifty: Alternate Plausibile Scenarios!!!

Nifty Daily chart

Nifty Daily chart

Nifty 120 mins chart

Nifty 120 mins chart: Alternate scenario 1

Nifty 120 mins chart: Alternate scenario 2


Nifty

We have shown 5 different charts of Nifty today with couple of alternate plausibility. Let us analyze each chart.

Nifty Daily chart: As seen on first & second daily chart, we are in for some deeper correction in Indian Markets. Prices took some support on the lower trendline that joins wave 4. Nifty has clearly broken down below the major Moving Averages and trendlines. This confirms the correction is of intermediate degree of entire rally from October 2008 onwards. Very deep correction in Small Cap and Mid Cap indices confirms this analysis. 38.2% retracement level comes in around 4800 with wave 4 support also lying at that level. Since this is a higher degree correction wave (2) we expect prices to retrace atleast 38.2% to 50% of entire rally (1) if not 61.8%. This gives a minimum target for down move to be around 4800 and plausibly lower!

Nifty 120 mins chart: This chart presents a case where we are considering wave (i) – (ii), i – ii formation and a very steep down move can start anytime soon. This scenario looks more probable since wave ii looks very small compared to wave (ii) to be considered as a 4th wave. Also Nifty has been selling off in stock rotational formation where a specific group of stocks leads the fall only to correct upward the next day when the other group of stocks falls. For example: within Banking sector itself ICICIBank, IDBI, etc were falling and SBI correcting upwards then SBI started falling, Capital goods stocks were falling with IT sector looking strong but the IT sector gave away next day with capital goods completing the upward minor correction. This form of sector and stock rotation has lead to a very brief bounce back in Nifty and the selloff has been in a very rhythmic fashion. Friday’s rally was seen in Banking sector and Capital goods (weakest of the sectors) whereas IT and Metals were the draggers (the strongest of the sectors). Looking at these structural movements we consider this scenario as preferred and any follow up rally in next 2 days above 5370 – 5400, we will adopt the alternate scenario.

Nifty 120 mins chart Alternate scenario 1: This scenario suggest we have completed just minor degree 3 with wave 4 formation started. This scenario considers entire down move in 5 wave structure and we are yet to see wave 5 down and wave 4 has started with Friday’s rally. This remains alternate possibility and we will adopt this scenario if Nifty continues to move sideways over next couple of days in the form of a triangle. The probable path is as shown for this scenario to be valid.

Nifty 120 mins chart Alternate scenario 2: This scenario considers entire down move as a Zig Zag correction in the form of wave A- B- C and Friday’s low mark an end to the entire correction. But this is probably only wave W and not completed correction of entire rally since as seen on Daily chart this is an intermediate degree correction. As per this scenario we can see some deeper correction which can take Nifty to 5700 – 5750 levels in 3 wave formation and then we will start a downward move again. We will adopt this alternate possibility if we see steep rally next week. The probable path is as shown for this scenario to be valid.

In short, we remain bearish on Indian markets with Friday’s rally as only minor relief rally and the downtrend will resume soon. The other scenarios will be adopted as preferred based on nature of upward correction we see in coming few days. Till we see a clear directional move trade with CAUTION over next few days!

3 comments:

  1. So which of the 2 scenarios do u now see us in ?? Looks more like the 2nd one ??

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