Monday, March 11, 2013

Nifty took a "V turn" Look reaction at 5970 levels!

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Bottom Line: Nifty had another Gap up opening on Friday. The short term trend remains positive.

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

We mentioned in previous update, “In short, the near term trend is positive to sideways. A move below 5800 will provide first confirmation that the downtrend has resumed. The current scenario remains valid as long as 5960 is not broken on upside.”

Nifty continued to show Gapping action on upside. Prices managed to open near 5884 with approximately 20 points gap up and started to pick up steam during second half of the trading session. Prices made a high of 5953 and closed near the higher end of the day. This continues to maintain the short term bias as positive.

RSI as shown on daily chart touched the level of 30 which was last seen in May 2012 before start of wave C from 4670 levels. This is another indication that the market dynamics that was valid from 4670 to 6110 has changed and the bigger trend has turned to down. However, we will not be too stubborn & will wait for prices to break below 5795 to confirm resumption of bigger downtrend.

As we keep mentioning, wave x normally provides important turning points or resistance to prices and prior wave X as marked on 60 mins chart comes near 5960 – 5970 levels. We will be closely observing how prices react from here. A decisive close above this zone will open up possibility for a move towards 6100 levels.

From wave perspective, the up move from 5664 levels has good momentum and is along with Gaps which is a typical characteristic of an impulse wave. However as seen on 60 mins chart, the move so far is perfectly channeled and contained within the blue trendline. A perfectly channelized move has higher chances of being corrective and not impulsive. Therefore we have conflicting signals and currently we have shown 1 plausible scenario as a-b-c with wave c = wave a at 5970. Prices are also near the upper end of the channel which should provide some resistance. 61.8% retracement of entire down move from 6110 to 5664 is placed at 5943 level where Nifty has closed.

In short, the near term trend remains positive but prices are near cluster of resistances which atleast should result into short term sideways action if not down. Such cluster of resistances if has to be taken out should be with a gap. Only a close below 5890 will indicate that the short term trend is probably changing from up to down. However a decisive close above 5960 – 5970 will continue the uptrend. 

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