Will nifty take a pause at 3750 or straight move on to higher orbit?

Last week market opened at 3384.75 & went down to 3296.90 to mark as the low of week.It continued to surge up relentlessly till 3491.35 to register the high of week & finally closed the week at 3480.75.Thus it gained the whopping 96.35 points during the week.In percentage terms it gained approximately 3% compared to previous week’s closing.

RETROSPECT: -
Last  week we recommended buying nifty on long side at any dip below 3400 preferably around 3360 with the stop 3280 for the target of 3700 or above.The trade has been so far sailing smooth on expected line & we advised holding long.

SENTIMENTS: -
The market mood is certainly bullish.However the bullish sentiments witnessed whipsawed above & below 200 dma placed around 3420 level.During the initial part of the week when nifty could not cross 200 dma many participants proclaimed the end of rally.In the later part of the week nifty jumped above 200 dma & bullish consensus has risen again.Every participant is watching the rise of nifty with  their eyes wide open in disbelief  or surprise.This disbelief or surprise is due to the fear & as long as this fear persists the rally will keep feeding on that fear.Disappearance of this fear will pave way for the decline.

ELLIOT WAVE THEORY: -
For the past many weeks we are trying to decipher the wave count from the 27 th Oct,2008 low of 2252.75. As discussed in last issue, we are left with the only two choices of flat correction or the impulse move from the 2252.75. The same has been shown in the chart below along with their wave counts.



However it can be seen from the chart whether it is flat correction or the impulse move the, the wave unveiling from 2539.75 should have impulsive structure consisting of five waves.Narrowing down to still shorter terms it has three probable wave counts.These are shown in pink,green & maroon colors in a separate  two hourly chart below.The probabilities decreases from pink to maroon.However higher targets in longer timeframe are probable from pink to maroon.Ideally no crystal clear wave count without flaw is visible at the moment & needs further unfolding to conclude with clarity.In the EWT terms we are in the middle of the wave count & therefore this pattern will end with additional same amount of time & more or less same amount of price coverage.It is precisely for this reason we have drawn pink color trend line & as long as this trendline is not breached decisively traders should hold on to long positions.

 

JAPANESE CANDLESTICK:-
 As shown in the chart below last week we had a seventh bullish candles consecutively.Since Jan 2008 this is the largest (points) & longest (time wise)rally which is still going on.On previous two occasions there were rallies but these were smaller & shorter.These are marked with the circle for the convenience of the readers.


 
CHART PATTERN:-
As shown below in the daily chart there is a flag formation occurred & it has broken out of this range.Theoretically speaking this flag should have target of 4400-4500.


 

PULSE-READING:-  
 At todays juncture there is no clear points or target reading  can be assessed.However bull operator or syndicate do not allow the prices to rise like a fairy tale on good news  but prefers to sell just at fair values but they are very prompt to buy with vengeance as & when market is below it’s fair value.This can be concluded that the current rally is far from near end & may continue beyond the current perception of the market participants.                                                                          

OUTLOOK & STRATEGY:-
We recommend to hold long position entred at 3360 with the stop 3405 for the target of 3750 or above.