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NIFTY HEADED FOR 3708........KOI SHAQE (DOUBT)?

Last week market opened at 3481.30 & went up to 3517.25 to mark as the high of week.It continued to decline up till 3351.50 to register the low of week & finally closed the week at 3474.95.Thus it lost the  6.80 points during the week.In percentage terms it lost approximately 0.2% compared to previous week’s closing.

RETROSPECT: -
Last  week our recommended long position entered at 3360 was stopped out 3405.However in our daily outlook we had reiterated to long above 3415.

SENTIMENTS: -
 Market participants see prices rising & turns bullish.However when they view the news ,events & analysis they become bearish.Hence they lack the conviction for the bull market.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 or gain of confidence 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 4 to 5 probable wave counts from 2539.75.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.We have deliberately avoided internal wave counts as we found in last one month wave counts are tilting in favor of longer duration & larger price coverage.Therefore we feel prudence lies in labeling the wave counts only when  they acquire the dominance.

JAPANESE CANDLESTICK:-
Last week we had shown in weekly chart that the current rising streak is longest duration as well as largest point coverage since the decline from Jan 2008.However this time in weekly there emerged a small black body candle.Theoretically this should be considered as break in rising streak but since it is smallest in series as well as formed during the truncated week we will continue to ignore its implications till the next candle supports or rejects it.Additionally one can see that downward sloping resistance line was breached on upside & stayed for last three weeks.This points out that since the 27th Oct 2008 if not larger at least same degree pattern equivalent to 6357 to 2252, has started unveiling.Traders will need extra ordinary patience, strategy & discipline to extract maximum juice of this move.

 

CHART PATTERN:-
Last we had shown the flag formation & indeed gave the target of 4400-4500.Howvwer it preferred to consolidate in the range of 3300-3500 for last 10 days.Theoretically more the consolidation higher the target & better the chances of pattern fructifying.

PULSE-READING:- 
This has no logic,theory,data or system.It is the experience coupled with the sound of soul.JKD’S pulse reading stated in plain words, market seems all set for the vertical break out & may touch the 3950-4150 range even prior to the announcement of election results.Prudent people will call it IRRATIONAL EXUBERANCE, but we say one will be able to sell & buy larger volume than average at that level. 

OUTLOOK & STRATEGY:-
We recommend to go long at any dip with the stop of 3360 for the target of 3900 & above.

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