Friday, April 29, 2011

Time cycles indicate positivity but wait for price confirmation!

Nifty 30 mins:

Sensex Daily:

Nifty broke below the support zone of 5780 level and closed the week at 5750. We are currently neutral and wait for index to start moving atleast above 5810 and then above 5880 for strong positive confirmation. A move below 5700 which acted as a support twice will indicate negativity. As shown on 30 mins chart, the 26 days cycles still remain intact and we would give a leeway of another 2 days and see if this cycle is still valid. Cycles exist and they vanish without giving any prior indication. We rely on them as long as it works.

Sensex chart above shows a bigger time cycle that we mentioned before. We are not even near the middle of this bigger cycle and so we should see a good move up. Shorter Time cycles shown on Nifty combined with bigger Time cycle indicates positivity. We can also see that ROC has been very useful in identifying the uptrend and most of the times when ROC crosses above 0 from below we see some good upward movement. Current ROC level on Sensex chart is -1.5 and we will wait for it to move above +2 level for positivity.

In short, Time cycles & Elliott waves are indicating positivity but the most crucial aspect is price which is not showing strength. We are therefore currently neutral and wait for 5810 – 5880 level to be crossed above in Nifty for positive confirmation. A sustain move below 5700 will increase the odds that the current rally was only wave X!

Monday, April 25, 2011

Nifty should resume uptrend SOON!

Nifty 120 mins

Nifty 10 mins

As shown on 120 mins chart, Nifty bottomed out at 38.2% retracement level near 5710. We expect this as completion of minute wave iv but if we see a steep rise now it can be just wave ii. Either ways we should see rally to continue above 6000 level in coming days. Prices also retraced the previous down move almost completely confirming that the uptrend is still intact over short term!

TCS results on Thursday produced unexpected movement. IT sector as a whole has been very tricky lately but we expect TCS will not behave like Infosys and should start moving up again.

As seen on 10 mins chart, prices opened gap up again at 5880 level and consolidated for the entire day. The entire movement up since 5700 has been impulsive and we expect this rally to continue.

A movement above 5940 will confirm our bullish view and a move below 5780 will challenge our preferred scenario indicating more complex correction in progress.

Monday, April 18, 2011

Nifty moving in complex wave iv!

Nifty 10 mins

On Friday, the IT major INFOSYS declared its results and market moved in extreme reaction. We never remember after stabilizing such a deep impact of results on Infosys. The stock corrected by almost 10% by the day’s close and there was no significant bounce back. The volumes were almost 10 times more than that of the 30 day’s average. This reflects huge dump of IT stock in the market. Honestly speaking results were not that extremely bad that will call for a spike in price of such magnitude. We expected that the event will be an end in spike but Friday did not produce any reaction. Please stay away from this stock atleast over short term and we are monitoring closely if this stock is close to bottoming out.

A fall of more than 170 points on Sensex was due to Infosys and all other stocks started reacting negatively in line with the major heavy weight. It will be crucial to observe how markets react now over a day or 2.

On 10 mins chart, we can see some MACD divergence and probably completion of the ending diagonal pattern. A move above 5840 will provide first small positive confirmation but beware that we might be developing into more complex 4th wave correction. It would be ideal to wait for atleast 5880 levels to be taken out on upside for strong positive confirmation. A move below 5780 – 5800 might indicate further correction plausible but the correction looks almost complete time wise.

Monday, April 11, 2011

Nifty correcting the steep rally!

Nifty 120 mins

Nifty 10 mins

As seen on 120 mins chart Nifty has so far moved up only in the 3 waves formation. Prices were moving in sideways consolidation – a typical action in wave iv but started drifting down in later part of the day on Friday. The 23.6% retracement level of the entire move up from 5350 to 5925 comes around 5780 – 5790 levels. This level also marks the zone of previous 4th wave of minute degree and so should act as a good support level.

As seen on 10 mins chart we can see 5780 level clearly as a support zone. MACD has also moved down below the 0 level over short term.

We are showing an alternate wave count on 120 mins chart marked in red at the bottom of the chart. This wave count suggest the current move up as only 3 wave formation and we have completed wave X and are ready to move down below previous low of 5200. This remains a lower probability scenario as of now. A move below 5600 will create an overlapping structure with previous wave i and this will force us to adopt this alternative. As long as 5600 level is intact we will treat this as a minor degree wave iv correction which can end near 5750 – 5780 level.

Sunday, April 3, 2011

India wins World Cup! History repeats..History can repeat itself again in stock market as well!

“Congratulations to Team India for winning the world cup. History repeats again after 28 years”

Nifty 30 mins chart comparison:

Nifty 60 mins Chart:

As seen on Nifty 30 mins chart comparison above, we can see a period from September to October 2010 in Nifty when it moved up from 5350 to 6250. We can see that the corrections have been very brief during that rally. The current rally also started from 5350 in March. We can see that current rally took less number of days to reach 5830 from 5350 level compared to previous such rally. If this impulsive pattern repeats than we should reach 6250 level before any meaningful correction.

As seen on 60 mins chart, Nifty consolidated in the sideways action. This is what we were expecting. We do not rule out the possibility of correction till 5700 but that will offer buying opportunity. A move above 5850 -5875 will confirm resumption of uptrend on minute degree.

Banking sector has corrected in last few trading but IT sector continued the rally. Metals should now start the rally and Banking looks to have completed the down move. IT might consolidate and other sectors might start rallying. This kind of sector rotational rally will produce very brief pullback on index. Metals started a good rally which were laggards before and we can see strong upside breakout in stocks like Hindalco, Tatasteel. We were concerned before since less number of stocks were participating in the rally but on Friday the advance decline ratio was amazing favoring the uptrend. Also Midcap and Smallcap index rallied when Nifty just moved sideways on Friday.

All this confirms that the rally should continue and 5680 – 5700 should act as short term support just in case prices correct downward!