Saturday, July 30, 2011

Nifty: Path Ahead!

Nifty Daily:
Nifty 30 mins:
Nifty 30 mins: Path ahead!

Nifty consolidated on last trading day of the week and closed the gap formed the previous day. We might form a bottom soon and market did not sell off even when major global indices were in red. Also close of gap indicates loss of selling pressure.

As shown on daily chart, 15 days time cycles have been doing a great job in catching short term bottoms or resulting into atleast some consolidation. Following are the reasons we expect some short term bounce:
- Cycle lows are already in place at Friday’s low or shall form a low over next 2 days
- Blue Pitchfork midline support also lies at 5450 shown on Daily chart
- Trendline support comes in at 5440 Daily chart
- Wave (c) = (a) at 5440
- 61.8% retracement of previous up move is near 5440
- ROC on 30 mins shows strong recovery and positive divergence
- Corrective channel support lies at 5430 shown on 30 mins chart

All these indicate positivity to us but we will still wait for price confirmation above 5530. As long as this level is not taken out on upside and if prices start steep selloff from here below 5530, we will resume downtrend but that looks a low probability scenario atleast for now.

PATH AHEAD: As shown on 30 mins chart, we think this is how prices should move over coming week. It is going to be difficult and more dynamic from trading perspective and there will be only small trends in either direction. However the short term bias remains towards upside unless a strong selloff starts now.

Monday, July 25, 2011

Sensex 69 days Time cycles still working very accurately!

Sensex Daily chart:

Nifty Daily chart:

Sensex daily chart shows that Indian markets have been following 69 days Time cycles very well. The intermediate term picture for next few weeks till last week of August can result into a bullish trend and the rally might last till 19900 – 20000 levels, after which a correction can start taking us below previous low marked as A near 17500.
Nifty daily chart has counts in sync with Sensex. Last week’s Thursday’s low failed to break below the previous low near 5497 marked as (a) and we might have completed a c failure pattern on Thurday’s low. A failure pattern has implication of strong movements in the opposite direction that is up since prices even failed to complete the pattern and is in a hurry to go up. However it is too soon to conclude this bullish behavior will ensue into intermediate trend till 5900 and we will wait for further confirmation above 5700. But a steep rise on Friday forms a strong bullish reversal pattern and so odds now favor bullish outlook over shorter term. Any movement back below 5550 will again indicate wave (c) is still ongoing.
To save from this whipsaw and randomly movements one can wait for 5700 to be taken out on upside for bullish outlook till 5900 or 5550 to be taken out on downside for bearish move till 5400 – 5450 levels!

Monday, July 18, 2011

Nifty corrected as anticipated! Nifty path ahead...

Nifty Daily chart:

Nifty 10 mins:

Nifty daily chart shows that we are moving in a complex correction of W-X-Y. We have completed W-X- a of Y. We have either completed b of Y either at the high of 5750 or we still are in wave b of Y.

Nifty 10 mins chart shows minute degree wave counts. It is very difficult to explain the nesting of wave counts and it can be very confusing. On 10 mins chart, blue line shows one possibility whereas red line shows the other possibility. A break of 5541 is deciding factor to confirm which possibility is developing. Friday’s consolidation completes Time correction but we might be moving in an expanding triangle rare pattern and one leg e to the upside (shown in red) is pending which might take us near 5682 from where the leg (c) down shall start.

To avoid the complexity and confusion of wave counts, in short we wait for negative confirmation below 5541. As long as 5541 is not taken out on downside we might see a rally till 5682 which shall act as a strong resistance level!

Monday, July 11, 2011

Sensex did not give a breakout above the important resistance Line!

Sensex Daily:

Sensex chart shows that prices did not give any breakout above the important resistance line we have been showing for quite sometime. This increases the odds that breakout on Nifty can be just a false breakout above 5700 levels. We have re-adjusted wave counts to accommodate recent activity and as shown on above chart we might be starting wave C down of Y. It is too early to confirm that a down leg is starting but a day or 2 of follow-up selling will increase the odds that wave C down has started.
Alternate scenario suggests that wave B is still ongoing and this down move can just be a minor pullback of rally from 17500 to 19000 levels and prices might just drift lower and consolidate before giving an upside breakout. Time-wise wave B should ideally consume more time than wave A and so this scenario stands equal chance. Both the scenarios as of now are equally plausible and so we will wait for prices to break key levels for trend confirmation.
Nifty Daily

Nifty 30 mins:

Nifty action for next 2 days is crucial to observe. As we mentioned above for Sensex, we have equally probable scenarios for positive and negative trend. Wave b is either over at the high of 5740 or is still ongoing and Friday’s pullback is just minute correction of the entire move up from 5200 to 5700 levels. The other scenario suggests that wave b is over and we are now starting minor degree wave c which will take prices below previous low at 5200. For now it is difficult to suggest which scenario is going to play out and so we will observe price movements very closely for next couple of days.
Over short term, as shown on 30 mins chart either of the scenarios are suggesting some pull back atleast till 5600 levels. Price reaction from important support levels will give us clue of what we can expect next.
To conclude, Friday’s down move was a bearish development and very short term trend is down with prices can correct till 5600 – 5550 levels. A move back above 5740 will indicate positivity and a break below 5500 will increase odds that we are going below 5200. But we will take one step at a time and watch Nifty’s reaction from crucial support levels.

Tuesday, July 5, 2011

Nifty hit the resistance @ 5700 as Expected!

Nifty Daily

Nifty Daily

Nifty 20 mins

We mentioned on 27th June,Markets have not done much since the correction started in November 2010 but everytime built false hopes in either of the directions trapping both bulls and bears. It has now become a norm for Indian markets to break the key levels but have no respect for that level and just take a “V” turn later. These types of movements are both emotionally and financially draining and worse for trend followers…..We now expect 5600 level which has been such a strong resistance zone to be broken and prices might rally till 5650 – 5700 thereby creating false hopes and trapping people on upside above 5600 and will turn lower trapping the bulls that are entering at higher levels above 5600, it being very strong resistance.”

This is precisely what has happened in Indian markets. We have been measuring the pulse precisely! The key level of 5605, which was very crucial before, we mentioned more than a week prior will be taken out without much hurdle trapping the bulls on long side after that and prices will reach only till 5700 before any meaningful correction starts. This is exactly what happened. Nifty opened with a big gap on Friday making a high just above 5700 and reversing immediately closing the week at 5624. We now wait for Nifty to either take out 5583 for some negative confirmation or to move above 5700 for further positivity.

Given strong RSI divergence on 20 mins chart we think Nifty will either move sideways to digest such a huge gain in past one week or might start correcting the entire move up before breaking 5700. Also Reliance (chart shown below) has perfectly retested the resistance line and now looks ripe to start downward correction. If that happens it might drag Nifty down along with it atleast to certain extent.

In short, we will remain very cautious here and observe if Nifty breaks below 5583 or attempts to cross above 5700 levels, to understand further price action!