Wednesday, January 16, 2013

Nifty in topping process probably for the year!

Bottom Line: Nifty made a high of 6069 within our topping zone of 6050 & 6100 levels!

Nifty Daily Line chart:

Nifty 60 mins chart: 

Wave Analysis:

We mentioned in previous report, “From trading perspective it is important for prices to show reversal signs near 6050 – 6100 levels. Unless we see reversal bar at those level avoid initiating short positions as market has been constantly forming higher highs and higher lows so far.In short, our bias over short term continues to be positive with 5940 as important level on downside but we remain cautious on long positions as the trend looks to be in matured stage with immediate target of 6050 – 6100!”

Nifty made a high of 6070 between the range of 6050 to 6100. We continue to believe that Indian markets are in topping process and should top out anywhere now. Prices continues to move up on slower momentum and BSE Smallcap index closed in red due to selling pressure in Smallcap sector during final hour of trading. Also number of declining stocks was marginally higher than that of advances which continues to conform to our topping process.

We are showing important channels which have worked very well along with price ROC that shows strong negative divergence and loss of momentum. The 2 blue channels shown in first chart clearly gives the level of resistances and supports. At 6100 there is confluence of bigger channel and smaller channel. Intersection points of trendlines are very important points. One drawback on using bigger channel is that the degree of error increases with increase in time. By this I mean that a slight movement in trendline near its origin can result into big movement in later periods.

If prices decisively closes above 6120 – 6140 levels it might result in re-entering into the bigger channel and will open up further positive possibilities. However such price action requires strong momentum on upside which is lacking as seen from Price ROC below.

From wave perspective we continue to believe that Nifty is in final vth leg up and this scenario is valid as long as prices does not closes above 6100 – 6120 levels. A move below 5950 will provide first negative confirmation that an important top is in place.

In short, we do not have negative price confirmation for now and so the bias continues to be cautiously positive. 

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