Reigning The Nifty - 10th August , 2009

Daily Chart

Weekly Chart

Last week we had three targets on the upside to achieve.

• 4693 top of rise from 2539
• 4812 channel target shown on daily charts.
• Sloping channel target of 5200.

Nifty achieved the first target of 4693 with ease but the moment this was achieved it was a laboured attempt to move higher. Conviction was more towards a retreat than a rise.

Momentum

• Among the weekly oscillators RSI14 and Stochastics having started moving down after a negative divergence. Macd is yet to give a sell.
  

• Daily oscillators RSI14 and Stochastics have moved down after showing a negative divergence. Macd in sell mode after negative divergence.
  

• The Intraday oscillators are in oversold territory. Price ROC 12 has taken support at levels reached when nifty touched 3918 and is moving up.
  

Moving Averages are bearishly aligned on the intraday charts. Daily and weekly charts are bullishly aligned.

Bearish Price Pattern And Trendline Break

• Rising wedge on intraday half hourly charts is broken with a target of 4380.
• The breakout above the green trendline joining January 2008 highs and the post budget high of 4693 in June 2009 was proved false on a weekly basis.
  

Bullish Price Pattern

• Breakout from a bullish falling wedge formed on weekly charts giving a technical target of around 5100.
• Downward sloping channel breakout on daily charts with a target of 5225 negated as price below upper trendline of the channel.
  
• The bullish Inverse Head & Shoulders pattern has given a breakout with a target of 5205 has been negated as the breakout was false.
  
• A larger head and shoulder pattern with neckline around the 4700 levels. I havent shown this on the chart as of now.
  

Sentiment Indicators

• Advance Decline line moving down after negative divergence.
• Nifty futures at a discount .
  

Conclusion

Last week I expected a correction considering,

• The Nifty was near strong resistances at 4693-4788.
  
• The 700 point rise from 3918 had had no meaningful correction.
• The rising wedge on half hourly charts showed Nifty may be in for an immediate correction.

Well, the correction did come furiously on breaking the rising wedge. As of now,

• The short term trend is down while the intermediate trend is still up.
• 4421 is the earlier low and the 38.2% retracement level of rise from 3918 is at 4423 which should be strong support.
  
• Below 4421, Nifty has strong support at 4325-4380 levels. 50 Dema is also around 4327 levels.
  
• The intraday charts show an oversold condition.

The trendline joining March lows at 2539 and July lows of 3918, shown in green, offers support for the week at 4250 to 4325 for the week. Holding this trendline will keep the bullishness of the upmove alive. One can look for oppurtunities to go long keeping these levels as a stop loss.

Happy Trading !!

Lakshmi Ramachandran
www.vipreetsafetrading.com