Monday, April 9, 2012

Nifty can move sideways to down for the week but medium trend is up!

Bottom Line: Nifty continued to have gap down action. Bias over short term is sideways to negative!

Nifty Daily chart:

Nifty 60 mins chart:

Waves Analysis:

Nifty had a gap down opening yesterday and prices drifted lower. Nifty opened at 5280 level which we had mentioned as crucial which was then taken out on downside. Prices stayed around another crucial level of 5250 before finally closing near 5235. The move has been steep and so the bias over short term is now negative. However the next support zone is now at 5200 which is the gap up area. Prices can try and fill this gap.

As we have said before, the trend down can be overlapping and it will be difficult to trade on downside since we are correcting the up move from 4650 to 5630 levels. Many of the stocks are exhibiting that their cycle lows are approaching around 16th April 2012. This suggests that we can have more of sideways to down action rather than impulsive strong moves this week.

As shown on 60 mins chart, we are moving in a well-defined corrective black channel and this on smaller scale can be seen as abc – x – abc type of formation and we are in wave a of second correction. This means we can move down little more today near 5200 - 5210 levels and should consolidate or move in a range for remaining of the day to complete wave b of 2nd corrective. This outlook remains valid as long as black channel is intact and prices do not exhibit steep selloff below 5200 levels.

For strong trend on downside, 5135 level should be broken today and failure to do that will suggest sideways action for the week with prices ultimately resolving on the upside. 5135 level is also a confluence of many Fibonacci Price – Time relationship and so exhibits very important level.

In short, given the gap down action the bias is negative as long as prices are below 5285 but Nifty can move in a range for the week. Trading on short side might be difficult due to complex corrective nature.