NIFTY ENTERS CORRECTION MODE:SHALLOW,DEEP OR MODERATE ?

      Last week nifty opened at 6105.95 &  then went up to 6284.10 to register the high of the week. It then declined  to mark the low at 6050.35 & finally closed the  week at 6062.65.Thus it lost 40.80 points over the previous week which is 0.65%  approximately.

RETROSPECT: - Last week we were in neutral mode.

SENTIMENTS: - There is certainly optimism & positive sentiments with the existing factors.However the massive selling resorted by the DII denotes the redemption pressure.This moves the pointer to the scarry memory of 2008 debacle & investors(who are not full time market man & have their other active business) have neither forgotton nor brushed aside.They have certainly made up their mind to take the profit of the table in spite of rosy picture ahead of 6000.We see this as very strong matured move on the part of the Indian investors.

ELLIOT WAVE THEORY: -   At 6284.10, nifty has terminated a wave pattern. The inception of this wave pattern can be taken from two bottoms 4786.45 (25th May,2010) & 5348.90 (31st Aug,2010).In the daily chart below we have shown three probable wave counts in dark green, blue & maroon colors. Essentially the blue & maroon colors are same with the difference of wave 2 being either zigzag or flat correction. Currently unveiling corrective wave's characteristics will largely determine which is the most likely wave structure. A very sharp ,swift & deep correction to 5500 will confirm the dark green color wave count which we put as 20% probability. A moderately deep correction to 5926-5816 range will confirm the blue color wave counts. We have assigned this as 45% probability. Pricewise a shallow correction to 5950 will confirm the maroon color wave count. Time wise this correction may be quite elaborate. We have assigned this as 35% probability.

On the larger time frame the weekly chart we have shown  the most probable wave count. However to elaborate on this we need some more unfolding of price data  with which hopefully we should be able to throw better light on course of the action in the market.

JAPANESE CANDLESTICK:- Last  week it formed the GRAVESTONE DOJI pattern. In week prior to last week it formed the small black candle.This is type of consolidation or correction being formed of the stupedous rise & may last for another 2-3 weeks.

CHART PATTERN:-  The upwardly tilted RECTANGLE FORMATION has been breached on upside.This is the 10-12 months consolidation within 700-800 points.The break out from such pattern has far reaching consequences on the next move.The present run up has met all the conditions of genuine break out.

OSCILLATORS READING:-  The daily RSI & MACD has  turned down from the over bought levels  & indicates the short term  bearishness to continue.The weekly RSI,STOCHASTIC & MACD  have remined overbought & deny any major correction on the downside.

SECTOR ANALYSIS:-  This week we are analysing the SOFTWARE sector.It has started correcting in last two days.It has already corrected the 5% & the 50% coorection level is another 200 points down here.This is another 3% down from present level & provides excellent opportunity for the long trades.

STOCK RECOMMENDATIONS:-  We would prefer to skip this in view of uncertain technical position.However as & when clarity emerges we will report in our DAILY MARKET OUTLOOK.

PULSE-READING:-  JKD SOUL VOICE SAYS  DO NOT WOORY FII MONEY IS IN PIPELINE & IT IS THE WEAK HOLDERS SHAKE OUT.This is the precise reason we said last week bite that much what you can chew.

OUTLOOK & STRATEGY:-  Keep strict watch on the 5940 for any long position. FRENZY HAS JUST BEGAN JOIN THE PARTY & ENJOY IT.