Saturday, June 18, 2011

Nifty & Reliance: MAKE IT or BREAK IT!!!

Nifty Daily chart:

Nifty made a low of 5355 and closed the week at 5363 near the strong support of 5350.
Following are the reasons for not taking a bearish stand even now and expecting a positive breakout:
- The wave structure of the down move from 5605 to current levels has overlapping formations and it has taken more time to correct the entire previous up move from 5300 to 5605. This looks corrective down move to us rather than new leg down
- 15 days cycle has turned up on 16th June and Time cyclicality is not favoring bearish outlook
- 8 days Price ROC (in red) near very strong support level. This indicates markets will enter into oversold state by any further move down
- 31 days Price ROC (in blue) also an indicator of bigger cycle of 62 days took support at -9 and is showing strong improvement even when prices are moving down. This looks bullish to us
- Blue pitchfork line drawn since October 2009 crosses near 5335 levels. This line has acted as very strong support
- Red pitchfork trendline drawn from the top of Jan 2008 crosses at 5335. This should also act as a support line
- Trendline drawn connecting Feb and June low coincides with blue pitchfork line and so makes the support level stronger
- 5335 is the intersection of Blue pitchfork line, Red pitchfork line, 15 days Time cyles. If market has to rally it has to give respect to this intersection juncture
We maintain our neutral outlook even when all the above scenarios indicate positivity as we have not yet obtained positive confirmation from prices. Please understand the ultimate authority to judge the correctness of our decision is “Price”. Everything will be void if prices ignore all positive technical indications and move lower below 5330 – 5350 levels with 5335 as the KEY LEVEL.
A move back above 5450 will provide further positive evidence and confirm that a significant low might be in place. But as long as that does not happen we would wait and watch how markets are behaving from the very strong support zone of 5330 – 5350. A clear break of these levels will indicate strong negativity and we shall be ready for some serious capitulation that might happen.
Reliance Daily chart:

Reliance has been constantly losing its rank in terms of Market Cap and has been in news for almost making 2 years low. Chart is what helps us to get objectivity and see the real picture. The stock has not been doing anything since past 2 years but just consolidating sideways. It is only 50 points that differentiates from 2 year low to just 1 month low. A move above 900 will make this stock only 1 month low as the stock is in consolidation phase and not corrective phase. So a 2 year low might sound too bearish but chart helps us to see the magnitude of this statement.
The stock has broken below 880 support levels and 850-860 is the last support zone that is left. A failure of taking support near 860 will be strongly bearish not only for Reliance but also for Nifty since it has the capacity of dragging the entire market down. Price ROC is near the strong support and Reliance should atleast consolidate even if it has to go down further.
We will be strongly negative on this stock below 860 which might correct this stock towards previous low made near 500 levels over medium term horizon. Keep an eye on this stock to get a clue where major market is headed!

3 comments:

  1. I like your post and it really gives an outstanding idea that is very helpful for all the people on the web. Thanks for sharing.
    regards:
    share tips

    ReplyDelete
  2. hi ashish,
    nice interpretation by u for guiding us all but the mkt is supreme and has broken on the down side,
    So what next kindly guide

    ReplyDelete