NIFTY UPDATE FOR WEEK ENDED 2ND JANUARY 2009.

First of all wish you all a happy new year.

The market has surprised every body during the week and moved up and colosing of a positive side for the week. Nifty opened weak moved toward 2800 made a low of 2812 and there after just took off and made a hight of 3079 on friday before closing at 3046 with a gain of 189 points over the previous week. It may be noted that nifty moved below the 20 Day EMA on monday and suddenly moved above it on the same day and started to move up for the whole weak. Nifty appears to be moving between 20 day and 50 day EMA so these two become the crucial resistance and support levels. It tried to move above the 50 day EMA two weeks befor failed and moved towards 20 Day EMA and in the current week it tood support at 20 Day EMA and moved towards the 50 Day EMA and now is just closed at 50 day EMA which is at 3050. So any move above the 50 Day EMA will be a significant event as previously it move above it in early October 2008 and there after fell like pack of cards. In september end and early part of October when it moved above 50 day moving average it moved towards the 100 day EMA just touched the 100 Day EMA and there after collapsed. So if nifty moves and closes above the 50 day EMA then it will surely try once again at the 100 day EMA which is placed at around 3390.

One point to be noted is that nifty failed to break above the 3100 levels this week also, it has been trying to break above it twice in a fortnight and failed so currently apart from 50 Day EMA 3100(3120 to be precise) appears to be a big hurdle for nifty to break, if it is taken out then it will surely make an attempt at conquering the 100 Day EMA. In my view no longs should be initiated till nifty moves above the 3100 levels successfully close is preferable. So any body wants to trade he can go long as soon as nifty move above the 20 Day EMA with a stop loss at around 3030-3040, and if it successfully closes above 3100 then stop loss should be moved towards 3100 levels. So the comming week will unfold a new trend eigther up or down. But the raise all through the week was not on high volumes so the rise is some what doubtful. If nifty fails to sustaing above the 3100 in the current week then i am sure that we might see 2500 levels in the month of january it self and probably an attempt at 2200 levels by february 2009. Considering this we can say that we are at a very crucial week ahead as far a trading is considered.

Now we proceed to Elliotte Wave analysis:

I have been advocating two alternatives for the last two months and they still hold good till not also.

Option - I Traingle:

Last week in the this option i have indicated that we might have compleated the "c" wave and we might have stated "d" wave and indicated that the target for "d" wave will be around 2810(min) and see what has happened nifty has made a low of 2812 ( where Wave"d" appears to have ended and and now it appears to be forming a "e" wave which shold be the final wave of the triangle after completion of which we might see wave-5 unfolding which has all the chances of taking the market towards the Oct 08 levels. any move above the wave"d" high will negate this theory or wave"c"( of triangle) is not still compleated and we might be in the final wave of the "c" wave after compleation of which we might see wave"d". If nifty moves above 3120 then it should not in any case move above 3240 high of the Wave"a" of the triangle. Any move above the 3240 will negate this entire option and we have to againg re-look the the wave structure. So it appears that the current week will through open the entire thing on the structure and we will be in a position to interprit it. So be prepated for it. One point to be noted is that volumes are slowely drying up and the market appers to be not giving any clear direction and every body is loosing interest in the movement of market as it is directionless and this is the peculiar feature of the triangle and when every body gives up and volumes dry up suddenly it give a clears break out with huge volumes and then moves fast there after. So have patience and keep a watch on the targets given as they will help you in giving clues about the market direction as per the above calculation/information.

One point to be noted is that, in the case of triangle also, the triangle will have five waves and each wave will have internal structure of five waves and one of the five waves will break itself into its components i.e five waves, so in this case it appears that wave "c" is itself breaking itself into five waves and it appears that we have compleated four waves and we might be forming a wave-5 of the wave-c after compleation of which wave-"d" will commence which will have a minimum target of 2800.

Option - II Flat:

If nifty moves above 3150 then we can beleive that we have all the chance of nifty making a flat. In this option it appears that we have compleated wave"a" and "b" and we are in the final leg of the flat i.e wave-"c". Flat will have only three wave "a,b & c" and we are in the final wave, one feature of the waves is that one wave of the three waves should break it self into components. Here it apperas that wave-"c" appears to be breaking it self into components. In falt wave "a &b" will have three waves each and third wave i.e"c' should have five wave and it appers from the chart that it is breaking itself into components i.e five waves and it appears that four waves are compleated and we are into the fifth wave and after compleation of fifth wave which will also signal the compleation of wave-4 and from there we will start wave-5 which has all the chances of moving towards the Oct 08 lows. So wait and see what the structure will unfold

I will be posting any update on the same as soon as the structure becomes clear. It appears from the above, that we might be heading for some choppy market after which we might get a clear direction.

Support and resistnaces:

Support - 3000,2950,2800

Resistances: 3050,3100,3240,3390

Turtle Trading - 4 week phenominon Two weeks back i have indicated as per turtle the we should go long on movement of nifty above 2975 and also said the it is better to wait for movment of nifty above 3161 look what has happened.
If any body has taken long postion at 2975

ATR is at 110 So add position on moves above 3090

Close position or book losses : on move below 2812

Take short postion on close below 2646

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.

M.Sri Mahidar, 4th January 2009, Time 7.58 PM