WILL NIFTY TEST 5200? YES, WE THINK SO.

Last week nifty opened at 4640.20& went down to mark the low at 4588.05 on the opening day itself.It then kept on  moving north  to register the high of the week at 4794.90& finally closed at 4754.10.Thus it gained129.8 points over the previous week which is 2.7% approximately.

RETROSPECT: -Two week’s prior we initiated short position at 4685 on breach of 4715 with the stop of 4800 for the tentative target of 4450.We have covered this at 4750 with the loss of 65 points. We have gone long FEB nifty future, long 4800 put FEB nifty, sold 4600 put FEB nifty & sold 2lots of 5200 call FEB nifty with the net debit of approximately Rs 35.This is as per our derivative strategy as reported down below.

SENTIMENTS:-Apathy is the sentiment.No one wants to listen or analyse the equity market.Fund allocation is diverting to commodity, currency, bond market & others leaving the stock market as abodoned baby of investment world. Whatever little funds allocated are sitting on tight string of purse awaiting  FII fund flow in new year,3^RD quarter earning announcement,global euro settlement.In short perrenial participants are also extremely cautious.In nutshell conditions are ideal for the rebound or U-turn in sentiments.

ELLIOT WAVE THEORY:-As explained in last few weeks we would analyse the wave count from 6338 (5thNov,2010) which suffice for our weekly insight.As the wave group are confirmed & stamped we would compact & integrate it with larger degree movements.We are labelling the 6638-5177 as the wave (A) OR (1) & 5177-5740 as wave ( OR (2).From 5740 it has been unveiling wave (C) OR (3)& on the chart below we have shown the internal lower degree wave count.This wave (C) OR (3) has exhibited the 5^{th EXTENTION}within 5th wave EXTENTION on the downside.Failure to cross 4840, points for the bearishness. With each passing day the corrective ABC wave count was losing the probability percentage & last level is the 4353.However last week’s price action has increased % probability of ABC correction but we will give prominence only if nifty is able to sustain above 4840.In the chart below we have given two alternate wave counts from the 5740 in green & red colour.As usual green colour wave count is either bullish or less bearish & red colour wave count is more bearish & less bullish. Both the wave counts calls for the bounce to 5000 & above but we would confirm only after it crosses above of 4840 & cross above of 5100 will reduce % probability of red colour wave count.

For the Bank nifty the top of 11451 on 8^th July, 2011 corresponds to 5740 of Nifty&essentially,the other wave structure of it is remaining similar. We do see 5^th extension within 5^th extension   wave unveiling from the 11451.We would watch eagerly the cross above of 8700 to confirm the target range of 9650—9910.

CYCLE- ANALYSIS:-Last couple of week we had given the brief introduction of cycle analysis & our limitation in presenting the same. In spite of these limitations, within limited flexibility we had stated that cycle forces are down till 30^th Dec, 2011.As we stated in our  last report it has taken pause & the bottom has got extended from 30^th DEC 2011 to 7^TH  Jan 2012.We see thereafter the cycle forces on upside till 28^th Jan 2012.

SECTORAL ANALYSIS:-We intend to analyse the REALTY sector for the week. On the down below we have attached the REALTY INDEX OF NATIONAL STOCK EXCHANGE. This index has formed the bottom of 179.85 last week & thereby terminated the five wave down sequence commencing from 320.20 (8^th July,2011).We are envisaging the corrective bounce of this decline , in the vicinity of 255-265, about 60% retracement level. Of course this rise will have its pause at 220-225 & will span over to FEB end.

JAPANESE CANDLESTICK:- Last week nifty as well as bank nifty has formed the PIERCING LINE on weekly chart after the DARK CLOUD COVER & BEARISH ENGULFING LINE respectively. We would give lot more weightage to bullish pattern than bearish pattern due to the prolonged decline.

CHART PATTERN:- On the nifty weekly chart  a distorted HEAD & SHOULDER pattern is visible.However there is no clear cut volume confirmation.Traders should be cautious on it as it may fructify or fails & accordingly move the market.In the weekly chart it is just desceding down within the well defined downward channel.In last one year every rally failed to cross the upper line of down trend channel.As long as it is unable to cross, primary trend remains down.However last week’s price action points for the retest of the upper trendline of the channel.On the longer term monthly chart as long as it holds within channel, it is forming a bullish flag pattern.

OSCILLATORS:- Majority of the oscillators in the  weekly & daily are clearly commenced turning in the oversold zone.

STOCK-RECOMMENDATION:-                                                

(1)We  recommend a buyon DLF LTD around 172  with the stop above 165 for the target of 220 & above  in next 8  weeks.

(2)We  recommend a buy  on JPASSOCIATE around  52.50 with the stop of 50 for the target of 70 & above in next 8 weeks.

DERIVATIVE STRATEGY:-We  recommend the following strategy with the view that 4531 is the intermediate  bottom & market is headed for the 5200.

(1)Buy nifty FEB FUTURE around 4750.

(2)Buy nifty FEB PUT 4800 FOR THE RS 170.

(3)SELL NIFTY FEB PUT 4600 FOR THE RS 90

(4)SELL 2 NIFTY FEB CALL 5200 FOR THE RS.24.

At 4600 strategy will be wrong & should be squared off  as stop loss & simultaneously at 5200 profit should be booked as target achieved.

PULSE-READING:-SOUL VOICE SAYS THAT MARKET HAS FORMED THE CORNER STONE FOR THE MUCH LARGER RALLY ABOVE 5500.AS & WHEN MULTI STAGECONFIRMATIONS  COME WE WILL CONVEY TO THE READERS.WE HAVE WRIITEN THIS TO KEEP MIND OPEN BUT NOT TO TAKE ANY ACTION TILL FURTHER CONFIRMATION COMES IN. PARTICIPANTS HAVE TO BE EXTREMELY VIGILANT AS MARKET IS AT A CRUCIAL JUCTURE OF PRIOR TO A BIG MOVE.

OUTLOOK & STRATEGY:-WATCH THE 4600-4840 TRADING  RANGE CAREFULLY & ANY BREAK OUT SHOULD BE FOLLOWED WITH THE OTHERSIDE NUMBER AS STOP

THIS IS THE PORTRAY OF GENERAL BROADER MARKET VIEW WITHOUT ANY SPECIFIC STRATEGY & SHOULD NOT BE CONSTRUIED AS SPECIFIC CALLS.FOR THE MORE POIGNANT VIEW ON MARKET,WINNING STRATEGY & PIN POINT TIMELY PRICE LEVEL CALLS, CONTACT US  TO SUBSCRIBE FOR OUR PREMIUM SERVICES.

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