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NIFTY HAS FORMED INTERMEDIATE TOP & ENTERED CORRECTIVE PHASE 

Last week market opened at 4582.35 & went down till 4365.10 to form the low of the week.It then continued to rise to register the high of week at 4693.20 & finally closed the week at 4583.40.Thus it lost  3.5 points during the week over previous week’s closing. 

RETROSPECT: - Last we had recommended the short sell above 4580 with the stop of 4637.This stop was clicked & market made a new top of 4693.20.

SENTIMENTS: - There is a sea change in the sentiments.Everyone has forgotton global recession,decline in earning growth, liquidity crunch,fiscal deficit burgeoning etc.Just recall what was the sentiments in first week of March 2009 & today it is exactly opposite to that.We feel this is ideal time for pendulum to swing towards the other side.Everyone is bullish & looking for the buying opportunity.Actually the substantial punture or correction in mid-cap & small cap stocks has cut some bullish sentiments but not with the major dent in it.However the shark reality remains the same & nothing much has changed.Even the talks of stability & majority are hollow as seen & demonstrated by DMK at the swearing in ceremony.Shear liquidity is pulling the market & participants should keep watch on that. 

ELLIOT WAVE THEORY: - As stated in last many issues, on the shorter term the wave count from the 2539.45 though should be impulse,can be labeled in many ways.In a chart below we have shown two most probable wave counts on the chart.These are shown in the blue & green colours.Our first preference goes for the blue colour.In the green color wave count the retracement levels are far deeper & lower so we have avoided them for this week.In case nifty corrects very deeply in coming week then we will consider them next week.

In the blue colour wave count the lower degree 4^th wave is at 4092.25 & it took 13 working days to form the top at 4693.20.At the same time the 61.8% & 50% correction levels are at 3979 & 4115.We have deliberately omitted the 25% & 38.2% correction levels.In case nifty returns strongly from these levels then in blue color wave count what we have taken wave 3& 4 will become wave 1& 2 of lower degree with the subdivisions & extention.This becomes too bullish to count at this juncture.In short we are looking to unveil a corrective wave from 4692.30 in coming week,heading towards the 4115-3979 range.The magnitude, momentum, volume & advance decline in the coming week’s downtrend will throw more light on the nature of the wave count. 

JAPANESE CANDLESTICK:- We have shown below the weekly chart & it shows the long legged DOJI formation.This indicates the indecision.At such a 9 month high this can only be indecision of bulls & certainly this will lead to sideways consolidation or decline.

CHART PATTERN:- As shown in the weekly chart in the vicinity of 4650 there were three multiple tops formed in 2008 & if we apply 3% rule & 3 days closing above the top, it has failed to do so even during its second attempt.We are of the view nifty needs more consolidation & decline in prices to gain further momentum to cross 4650 decisively. 
 
 

PULSE-READING:- JKD soul voice says that when bullish sentiments is more than 80%, it is difficult to run the bull market further.It is best to shake out the weak holders & make the market slim, trim & alert specifically if so the union budget is few days later.           
 
 

OUTLOOK & STRATEGY:-

We recommend selling short at any rally with the stop of 4670 for the target of 4200 or lower.  

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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.