12 September 2009

Nifty : What Next?

I have been tracking Nifty almost second by second and to be frank any 50-60 point move would give me a heart attack!! Last four days have been as dull as it could be for the index. The only achievement it has made is a move over 4800. The bulls are happy that it is staying above critical resistance of 4800 and bears would be satisfied that the much talked about breakout above 4750 has not resulted in any runaway move.

The fact that even after breaching 4750 (which was considered as a major resistance by many "experts") the market has not made any major gain tells us that we have another resistance somewhere where we are. To break the market is buying time staying at the same level or maybe even correct to gather force to break it.

We had a very good chance to give a shot at 5000 on Thursday when Nifty opened almost 70 points up and even reached 4889 but saw tremendous profit booking for the entire day. Technically if we open above a resistance level we should see markets moving further up but that was not the case, so we can say that there is resistance even above 4889. Nifty was also very overbought at that point of time, though it is not the case now.

Take a look at the chart (click on it to enlarge). I pay attention to volumes a lot as it indicates participation and for the past four days we can see it has just been pretty much up there, with a slight hint of hesitation in participation by traders. Surely they still have a fear of heights. The MACD also shows a dip in momentum, which is mainly due to the sideways movement.

I would like to comment on CMF which measures the buying pressure, a high value of CMF points to accumulation. We can also say that strong hands are participating. It was pretty high when the Nifty moved from 4650 to almost 4750, we can again see accumulation of Nifty stocks at those levels. It can act as major support. It is also backed by the 13day and 21day EMA around those levels.

So, what to make of these observations. We see that most of the technical indicators are pointing to some sort of correction atleast to 13day EMA at 4721. If somehow the sentiment changes to a less positive one to 21day EMA at 4671. Lets see if this correction which should be a healthy one materializes or the bulls gain upper hand again. There are hardly any shorts in the market so i dont believe we can go much higher without any decent correction of atleast 100 points.


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