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NIFTY IN A PERIOD OF CONSOLIDATION FOR THE NEXT UP MOVE

Last week we had an unprecedented opening in the NIFTY which also made history in the Indian markets by going upper circuit. Nifty opened at 3673.15 & this itself was the low of the week.It then rose to 4509.40 to mark the high of the week & finally closed the week at 4238.50.Thus it gained 566.85 points during the week & risen by 15.44 % compared to previous week’s closing.

RETROSPECT: -
 We had been recommending to hold on long positions in the market from beginning of May. The upburst in markets from the election results has given huge positive returns to the existing long positions.

SENTIMENTS: - The election uncertainity has just vanished and now the market participants are looking forward to next developments.The rise had been too good & swift to believe.In effect everyone has been left out to participate in this move.The mind set of participants have not yet digested the current higher level & heart in heart they crave that market will come down & they would be able to board the bull-train.Usually such emotions & cautions self feed the bull-run.

ELLIOT WAVE THEORY: - 
 In the last many issues we were attempting to decipher the wave count from 27th Oct,2008 low of 2252.75.The waves unfolding from there can either be a flat or a new impulsive move.With this in mind,we have labeled the 5th Nov,2008 top  of 3240.55 as either wave [1] of impulse or the wave {A} of flat correction.Similarly the 6th March,2009 low  of 2539.45,has been labeled as wave [2] or wave {B}of flat.The wave unveiling from there onwards is similarly either wave [3] or wave {C} of flat.It may be pertinent to note that in either case the internal wave structure from 2539.45 should terminate with the five waves witin it.

 
In the chart above we have shown the internal wave counts from 2539.45.Till 3511.25 there is clear advance in five waves.Thereafter the correction of larger degree wave 2 can be labeled in two different ways.These are actually shown in blue & maroon colors.We have shown their respective wave journey targets with their respective probabilities.

JAPANESE CANDLESTICK:-
On the daily chart above, we see a clear formation of a doji on Tuesday which was away from the real body of the previous large candle. This was followed by two black candles & then with the hammer formation.The hammer formartion indicates the termination of the downtrend from 4509.40 level.We would be awaiting the formation of white candle to confirm the hammer.

CHART PATTERN:-  
We have a flag formation since the Tuesday’s high & volume had been also tapperring off.If this flag breaks upward with the volume then we may see a rally of another 300-400 points.In case this flag breaks with average or low volume then we may see some sideways movements.

PULSE-READING:- 
The large majority & continuity of Mr. Manmohan Singh govt is hugely positive factor in intermediate & long term.In the short term major discounting has taken place & traders as well as mutual funds are pocketing the gains on table.The soul voice at JKD echoes that funds who were sitting on cash during the decline will scramble to buy & may push nifty 5000 or beyond sooner than later.     

OUTLOOK & STRATEGY:-
We recommend booking partial profits at levels near 4450 and wait for the larger correction to over before entering fresh positions.In case it crosses the 4550 with the volume enter long with the stop of 4450 for the target above 4800 & may be 5100.

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DISCLAIMER
This Newsletter is an expression of Technical Analysis. It is NOT a market prediction. It is NOT an advisory or suggestion to buy or sell any types of securities. This is an educational and learning exercise, only to share our methods of technical analysis. Trading and Investing MUST always be done with prudent money management and use of stop losses. One Bad trade can ruin the trader, so always keep risk low. IF you do not agree with the statements mentioned herein, please close this document, do not proceed further, do not read the Newsletter.