Thursday, February 14, 2013

Nifty can have short term pull back!

Nifty failed to sustain near 5970 levels but broke above the downward sloping trendline even on daily chart.

Nifty Daily chart:

Nifty 60 mins chart:

Wave Analysis:

We mentioned in previous update, “It will be important to see if prices can sustain above 5940 – 5960 resistance zone to conclude that the short term pull back of the down move from 6110 to 5880 has started. In short, we are closely observing how prices react from 5940 – 5960 levels if it reaches there and the bias continues to be negative as long as these levels are not taken out on upside.”

Nifty had a gap up opening near 5940 levels and managed to sustain the gap during first half of the session. However, prices made a high of 5970 which is the 38.2% retracement of the down move from 6110 to 5880 levels and reversed from there. Failure of prices to sustain the gap up opening confirms that the up move from 5880 is corrective in nature.

As shown on daily chart, prices have now decisively broken above the downward sloping trendline and managed to form higher high and higher low compared to previous bar and also managed to close above previous high which was at 5928. A close above previous day’s high has happened after 10 daily bars. This confirms that prices have now started the upside correction of the down move from 6110 to 5880.

As shown on 60 mins chart, a sharp up move which is quickly retraced is normally seen in triangle formation and so one can expect sideways consolidation between 5970 and 5880 levels over next 1 to 2 days. We are also applying Bollinger Bands in current scenario as sideways action is plausible and Bollinger Bands works very well during such scenarios.   

Midcap and Smallcap indices closed negative and breadth continued to be negative. Any improvement in overall breadth will further confirm the upside correction.

In short, as long as 5880 and 5970 is intact on both sides one can expect sideways movement in Nifty over next few days. Move above 5970 can result into an upside correction towards 6055 which is 76.4% retracement level of the entire down move. Only a break of 5880 level on downside will confirm resumption of downtrend towards 5600 else expect some pullback before we reach towards 5600!

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