WILL THE OIL PRICE DEREGULATION SPARK NEW BULL MARKET?

      Lastweek nifty opened at 5266.50 & went up to register the high of the week at5366.75.It then declined to mark the low at 5259.90 & finally closedthe  week at 5269.05.Thus it gained 6.45points over the previous week which is 0.13%.

RETROSPECT: - Our shift from neutral to bullishstand provided the necessary edge over the market.

SENTIMENTS: - Global clues on the negative side diminishing, FII hadbeen consistently net buyers,announcement of oil price deregulation,pact ofRIL-RNRL for gas supply have cleared many uncertainties & provided theboost to bullish sentiments.However the 5300-5400 being upper level of rangehas prompted profit booking to cool off the bullish exuberance.

ELLIOT WAVE THEORY: - In the chart below we havegiven two wave counts from the 25th May 2010 low of 4786.45.The bullish wavecount is in the blue color & bearish wave count is in the red color. Forthe bullish wave count to be valid ,it should  not fall below 5147 & ideally to maintainits vigor reverse from the5215 or above. For the bearish wave count to be validit should overlap 5147. At present we assign 65% probability to bullish wavecount & balance 35% to bearish wave count.

JAPANESE CANDLESTICK:- Last week it has formed the GRAVESTONE DOJI pattern as shown in thechart.It is a bearish pattern.However it need to be confirmed with the blackcandle in coming week or it should trade substantially below the GRAVESTONEDOJI to confirm.

CHART PATTERN:-  In the daily chart a bullish flag formation isundeway & if it maintains & breaks upward we may see 5600-5700.

OSCILLATORS READING:-  The daily RSI,STOCHASTIC & MACDhas  turned up & indicates the shortterm rally atleast.The weekly RSI,STOCHASTIC & MACD  have remained the neutral mode.

SECTOR ANALYSIS:-  The obvious choice is OIL & GAS sector asit has been deregulated from the govenment control.For the past one year it isforming the upward  tilted rectangle orflat formation in elliot wave terms.This is on the upper band of it & thevolume its constituents have done on Friday makes us to believe it will breakout & touch 11800.However from there we expect a pul back & then toresume again the uptrend.

PULSE-READING:-  JKD SOUL VOICE SAYS THAT MARKET ISJUST RIPE TO EXHIBIT THE IRRATIONAL EXUBERANCE & RETAIL & NOVICEINVESTORS ARE ADVISED TO REFRAIN IN THIS MADNESS.

OUTLOOK & STRATEGY:-  Keep strict watch onthe 5160 for downside & 5330 for upside & follow the break out. Ideallymarket is preparing for big break out & be prepared for it.