IS NIFTY TEASING BEARS WITH NOMINAL NEW HIGH EVERY WEEK?

      Last week nifty opened at 5439.80 & went up to register the high of the week at 5492.30.It then declined to mark the low at 5372.45 & finally closed the  week at 5452.10.Thus it gained 12.85 points over the previous week which is 0.25%.

RETROSPECT: - Shorts entered on breach of 5425 have narrowly escaped the stop of 5500 & continue to maintain the negative bias. We would like to raise the stop 0f 5500 to 5525 with the current unfolding in the nifty.

SENTIMENTS: - There is no perceptible change in sentiments over the previous week.However the earning season's short fall to the expectations have & become reality & began readjusting in price level.

ELLIOT WAVE THEORY: -   Since nifty made a nominal high above 5487.15 at 5492.30,we have to redraw the trend line & wave labeling with just minor changes while keeping the soul of the logic unaltered. Last week we reported that the breach of purple color trend line by price on downside will be the first confirmation of the top formation. In other words simply stated it has completed the five wave sequence from the 5210 to 5492.30.It has in fact breached the purple color line on downside even though we are reluctant to pronounce 5492.30 as confirmed top. The reason for this is obvious that in terminal pattern we may come across such false breach & market makes a nominal high above the previous one without altering the major wave count but in the process impatient traders who initiated trades get stopped out. Therefore we would like to give some more time to unfold further price action to confirm the top & hence the completion of the five wave from 5210. This five wave sequence is itself the 5th wave of the larger degree five wave commencing from the 4786.45.The 2-4 trend line in blue color of this larger degree wave has  already  breached on downside confirming the larger degree termination of wave at 5492.30.

The final confirmation of this requires that the rise from 5210-5492.30 should be completely retrace in lesser time than it took to form. This rise had taken 28 working sessions & decline has consumed so far the 4 working days. Ideally such larger degree top is accompanied by much sharper sell off .In other words decline should take much less than 28 days.  In such case it is the red flag caution for  bulls  as it will be terminating a  still larger pattern of a DIAGONAL TRINGLE on upside. In turn this DIAGONAL TRIANGLE is TERMINAL PATTERN of still larger degree five wave pattern which commenced from 6th MARCH 2009.We have shown this DIAGONAL TRIAGLE in daily chart & larger FIVE PATTERN in weekly chart below.

               A BREACH BELOW 5210 WILL BE THE CONFIRMATION OF THE TOP FORMATION AS WELL AS DOWNWARD COMMENCEMENT OF THE WAVES.THIS WILL BE CORRECTING THE RISING WAVE OF 2965 POINTS SPANING OVER 16 MONTHS.THIS IS THE INDICATION OF THE MAGNITUDE & DURATION OF THE CORRECTION LIKELY TO SET IN.HENCE WE ADVISE TO LIQUIDATE ALL LONG POSITIONS UNLESS THE SPECIFIC STOCK  DISTINCTLY DISPLAY THE BULLISH PATTERN.

JAPANESE CANDLESTICK:- Last week it has formed the DOjI STAR.It denotes indecision on the part of the nifty for its direction.

CHART PATTERN:-  The rising wedge pattern in the weekly chart is still valid & break out will be confirmed on breach of 4900.It may be pertinent to note that in daily also there is wedge formation & may break during the week.

OSCILLATORS READING:-  The daily RSI,STOCHASTIC & MACD has  turned down & indicates the short term  bearish atleast.The weekly RSI,STOCHASTIC & MACD  have remained the neutral mode & may turn down if nifty moves down with vigour.

SECTOR ANALYSIS:-  This week we are analysing the CAPITAL GOODS sector.It has fallen sharply from 15440 to 14550 in first leg of zigzag.It has completed the second leg at 14875 & commenced the third leg on downside.We see it declining max to 14300.We are positive on this sector & advise buying near the 14400 for the target of 16000 & above.

STOCK RECOMMENDATIONS:-  

(1)SELL BHARTIARTL AT 322 WITH THE STOP 325FOR THE TARGET OF 307.

(2)SELL POLARIS AT 173 WITH THE STOP OF 183 FOR THE TARGET OF 152

(3)BUY AXIS BANK AT 1333 WITH THE STOP 1310 FOR THE TARGET OF 1390.

(4)BUY INDHOTEL AT 103 WITH THE STOP OF 100 FOR THE TARGET OF 115.

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

OUTLOOK & STRATEGY:-  Keep strict watch on the 5425 for downside  & follow the break out. Ideally market is preparing for big break out & be prepared for it. BEWARE OF TRAP OF FALSE BREAK OUT ABOVE 5492.30.