IS NIFTY BREAKOUT ABOVE 5500 IS REAL OR TRAP?

      Last week nifty opened at 5452.10 & went down to register the low of the week at 5397.40.It then rose to mark the high at 5546.60 & finally closed the  week at 5530.65.Thus it gained 78.55 points over the previous week which is 1.5%.

RETROSPECT: - Shorts entered on breach of 5425 have been stopped out at 5500.We maintain no action mode till the market picks up momentum in either direction.

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.Expectations started to build on fertilizer & power policy after the oil marketing & telecom policy from the government.

ELLIOT WAVE THEORY: -   Since nifty made a nominal high above 5492.30 at 5546.60,we have to redraw the trend line & wave labeling with just minor changes while keeping the soul of the logic unaltered. In these minor changes we have redrawn the purple color 2-4 trend line while keeping the blue color larger degree 2-4 trend line intact. The five wave sequence which commenced from 5210.00 & we are looking to terminate, can maximum have the target of 5578 & no more beyond. The confirmation of these five wave sequence termination will be the breach of purple color 2-4 trend line. 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 that the five wave sequence from the 5210.00 being the terminal in nature.However our first target on downside after the termination will be 5400 & then 5210.

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 small white candle along with the break above of 5500 but it is too small & devoid of any momentum to reach conclusively on any trend 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 & 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 REALTY  sector.It has risen sharply from 2857 to 3715 in last 3 months.Technically we do not see it going beyond 3800 in the current run up & on the contrary we see high probability of correcting till the levels of 3400.Therefore we advise booking profit in this sector  so that at lower of 3400 can reinvest.

STOCK RECOMMENDATIONS:-  

(1)SELL HINDPETRO AT OR ABOVE 520 WITH THE STOP 530 FOR THE TARGET OF 480.

(2)SELL DISHTV  AT OR ABOVE 51 WITH THE STOP OF 52 FOR THE TARGET OF 45.5

(3)BUY CUMMINSIND  AT 710 WITH THE STOP 694 FOR THE TARGET OF 780.

(4)BUY KSOIL AT 54.85 WITH THE STOP OF 53 FOR THE TARGET OF 60.

(5)BUY TATACOMM AT 340 WITH THE STOP OF 330 FOR THE TARGET OF 378.

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 5478 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 5546.30.