Reigning The Nifty - 3rd August, 2009

Monthly Chart

Weekly Chart

Half Hourly Chart

Daily Chart

Daily Oscillator Chart

On week ended 17thJuly I wrote, "We are once again in the perplexed state whether markets will move up or down. This is the reason we follow price with stop losses instead of making these difficult predictions about the future. Remain long with a stop loss of 4200 for targets of

• 4402 61.8% retracement of fall till 3918
• 4480 previous top
• 4590 falling wedge target --shown on half hourly chart
• 4693 top of rise from 2539
• 4812 channel target shown on daily charts."
  

Two weeks later we are yet to achieve the last two targets. The price action meanwhile has also thrown up a technical target of around 5100-5200. Let's check out the hurdles if any, on the path to achieve it.

Momentum

• Weekly oscillators are showing strength having started moving up again after a very shallow dip.

• Daily oscillators RSI14 and Macd have moved up after taking support at levels above oversold territory which is a sign of strength, but have not moved up in tandem with the nifty. Stochastics has moved down from overbought levels after showing a negative divergence. The last two days upmoves have led to giving a buy again , but till the lower top lower bottom on this oscillator is invalidated one should be vigilant for cracks in the upmove.

• The Intraday oscillators are still showing negative divergence, supporting the bearishness of the rising wedge , indicating light positions till the divergence gets corrected.

Moving Averages are bullishly aligned on the short and intermediate time frames.Long term (monthly charts) have yet to confirm.


Bearish Price Pattern

• The Nifty has moved decisively above the neckline of the bearish Head and Shoulder pattern indicating a flase breakout below neckline. This was a bear trap and since nullified.
• Rising wedge on intraday half hourly charts which if broken may trigger a correction of 250 points.
  

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.
  
• The latest pattern to emerge -- the bullish Inverse Head & Shoulders pattern has given a breakout with a target of 5205. The upward sloping neckline makes it all the more bullish.
• 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 continues moving up supporting an upmove.
• Follow up buying during the week was on marginally lower volumes --shown on the daily oscillator chart which puts up an alert.
  

Conclusion

• The trend is now UP.
• Nifty has strong support at 4300 and so long as the 4300 levels are held we can expect higher levels.
• There are negative divergences on intraday charts and the daily oscillators are showing signs of weakness, which may be signalling that a correction is due.
  
• The Nifty is near strong resistances at 4693-4788.
  
• The 700 point rise from 3918 has had no meaningful correction.
• The rising wedge on half hourly charts shows we may be in for an immediate correction.
  

Considering all the above points, one can look for oppurtunities to go long with a stop loss of 4300.

Happy Trading !!

Lakshmi Ramachandran
www.vipreetsafetrading.com