Nifty for the week ended 9th January 2009.
Nifty has moved exactly as indicated. If any body is following the weekly updates the movement of nifty would not have surprised him. Nifty opened the week on a strong note at 3043 and moved up to make a high of 3147 and collapsing like a pack of nine cards, thanks to satyam made a low of 2810 and closed the week with a loss of 173 points at 3873. Even though nifty has concoured 3100 it failed to maintiain at higher levels indicating that 3100 appears to be a major resistance levels for bulls to concour. It appears that the bulls did not want to spoil their new year party and continued it till tuesday and then bears came back with a vengence, probably from new year holidays and bears have to surrender all their two weeks gaings to bears. The point to be noted is that the rise for the last two weeks was on very low volumes and the fall on last two days are on huge volumes indicating that it is still a bear market and we should use every major rise as a shorting opportunity. I have indicated in my last weeks update that even though nifty moves above 3100 it would be difficult to move past 3150 and nifty made a high of 3147, i have also indicated that if it fails to move past 3150 then we have minimum target of 2800 for nifty and look at the low made by nifty 2810 it missed the target by a whisker. There are one or more points which are to be noted which will offer very good opportunities for us to trade in the future period.

1. Nifty failed to sustaing above the 3100 levels, which becomes a very curcial resistance level in future period when ever it has to move up.
2. Nifty has for the last two week moved above the 20 Day EMA and it was finding support at those levels. It was moving betweek 20 Day EMA and the 50 Day EMA and during the current week it has just moved above the 50 Day EMA and collapsed on the last two days and has moved below the 20 day EMA which is at around 2970 levels. So in the comming weeks or months the 20 Day EMA becomes a crucial resistance levels to be concurred by bulls. So any shorts should be immediately closed when ever nifty moves above the 20 Day EMA. So the level to be watched our for comming weeks at present is 2970.


3. Nifty has taken support at 2800 in the last month and also during the current week. When ever it touched 2800 levels it rose sharply, considering this 2800 becomes a crucial levels for the comming week any breach of the same should be taken a very bearish scenerio and should be shorted with a stop loss one tick above 2800, if 2800 is voilated then we have all the chances of nifty moving towards 2670 and 2503 levels. So watch out for 2800 level.
4. In the weekly charts nifty has formed a very bearish pattern the "Dark Cloud Cover" which is an extremely bearish pattern and which does not require confirmation. Meaning that we have all chances nifty making a new low. But the high of the week should not be voilated i.e. nifty has to move above 3147 to negate this pattern implications. So any move below this weeks low of 2810 should be taken as an opportunity to short the market with stop loss at this weeks close.
5. Nifty is failing to move above the sloping trend line conneciting all the lows from January 2008, which i have been discussing for the last few weeks indicating that weakness still persists and nifty has to break this barrier to indicate that bulls are gaining upper hand. Till this is broken we all the rallies should be taken as a shorting opportunities.

Elliotte wave analysis:

i have been discussing two alternatives for the last several weeks, still it has not been confirmed as to which pattern it is forming.

Option - I -TRIANGLE

Last week i have explained that if nifty moves above 3121 then we have to change the counting of the different waves of the triangle and as nifty has moved above 3121 it appears that nifty might have compleated wave"c" instead of wave "e" indicated earlier in the last week. last week i have indicated that if 3121 is voilated then we have to recound entire wave structure and the same has happened during the week. So as per the new structure it appears that we might have compleated wave -"c" at 3147 and also wave - "d" at 2810.Wave -"c" was of length 644 points from 3503 to 3147, so wave - "d" should be of length atleast 50% of 644 points i.e atleast 322 points, considering this the minimum fall should be 322 points from 3147 which comes to 2825 and nifty has made a low of 2810, so i have assumed that wave-"d" would have compleated. if wave -"d" is compleated at 2810 then we should be forming wave-"e" which would have minimum length of 168 points i.e it indicates the nifty should move towards 2978 after which it should collapse from those levels to sub 2500 level. incidently 20 day EMA is also at 2978 so this level assumes a curcial importance from elliotte wave point of view. Any failure of nifty moving towards 2978 and break of 2810 will negate the triangle formation and we the Option -II holds good. So as per this pattern we have all the chances of nifty making an attempt at 2950.

Option - II FLAT

As per this option i have indicated in my last weeks update( chart you may refer last weeks update) that the wave-"c" of flat should have five waves and indicated that we have compleated four wave and that we are in formation of fifth wave. it appears that fifth wave should have compleated at 3147 and also we might have ended the 4th wave of one higher structure and we should have started wave-5 ( which we are discussing from last so many weeks) any break of 2810 in the comming week without nifty moving towards 2950 will confirm the flat formation, Which also confirms that we might have to see atleast 2503( the low of Wave-C) and we should alteast go near the oct 08 low of 2223 in the comming weeks.

Considering the above it appears that bears have the upper hand atleast at this point of time. Unless and otherwise nifty moves past 3147 bears are not defeated. So you are advised to trade accordingly.

Supports: 2800,2670,2503,2223

Resistnaces:2968,3000( psychological),3100,3161,3240

Turtle Trading: 4 week Phenominon,

Two week back i have indicated that we should take long position once it has moved above 2975 but has asked to wait till it moves past 3161 look what has happened as nifty did not move above 3161 we are saved.

if we have taken a long position at 2975 we might have closed our position at 2812 with a loss.

In the current week: Go long on close above 3147

Go short on move below 2812

ATR is at 117 indicating that further short position should be added on move below 2578 with a stop loss at 2695.

Note: the above write up is only, the interpretation as per the patterns and should not be construed as an investment advice. and the author is not responsible for any loss incurred in this regard.

M.Sri Mahidar

11th January 2009 Time:8.15 PM