04 September 2009

Tracking Nifty as on September 3

As per my previous post on Nifty's trend where I suggested that we can see slight correction played out pretty much on line. As I write Nifty closed below 4600 on a sluggish day of trade. Coming to the Technicals as they stand today.

We see that the trend line as well as 34 Day EMA lies around 4550, which should act as a strong support. It also represents 38% retracement of the move from 4350 to 4740. If Nifty does not hold 4550 we should get ready for some significant correction. In my opinion, this should not be the case.

We are seeing the selling losing conviction (volumes drying). StochRSI also shows that we have moved away from overbought conditions and another few days of negative biased trading will bring it to oversold level.

In the chart I have labeled Elliot wave counts, without getting into details of that: the expectations out of it is that we should see the current selling end around 4550, the deeper we go below 4550, weaker would be the bull case I am going to describe.

After hitting the support level of 4550- 4380, there should be a strong upward momentum yet again, which would find resistance again at the 4730-4750 level, this time we will break it but find another resistance to cope with at 4790-4800. If the momentum is enough to break the 4800, I am pretty confident that bulls will finally take over and we are going to hit 5000 in a few days time.

The wave counts that I am following makes this upmove a wave 3 of a larger wave 3. And wave 3 are generally accompanied by high momentum. So if things fall in place as per above, we should see few consecutive hundred Nifty points trading days.

So the ideal way to play this would be getting long on dips. The scenario discussed above fails if Nifty closes below 4350.


Faisal said...

Markets did go up strongly on Friday...I think we are headed for higher levels on the Nifty next week...The U.S. markets also went up strongly even after the dismal job report...In my opinion we might reach levels close to 4800 on the Nifty..I am not very sure if we will reach 5000 levels this year...But anyways your analysis discouraged me to again short the markets and thus saved some of my capital.:).

Tarique Anwar said...

i am glad it saved something! yes 4800 definitely seems to be on next week. i too doubt if we can cross it easily. its a critical resistance that we are going to hit. time to be cautious both on long and short side around 4800.

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