Tuesday, May 17, 2011

Nifty Update : Breakdown Ahead ???

Today's trading broke down the Short term Trendline as well as the crucial 5475 level after days of trying to trade above 5550 level and failing. Lets check out what lies ahead.

1.The updated chart of the one which was posted on weekend for trading this week. CLICK HERE

2. As mentioned in the previous post , the important supports are in the 5350 level (Lower Bollinger Band in the Daily chart) and 5250 zone ( Medium term Trendline support). Check the Trendline chart below.

3. Data from FII (and DII too!!) trading, Options and Indicators suggest further weakness.

4. The big cut that heavyweights as SBI, ONGC and RIL took in today's trade, is also not encouraging.

5. The cause of concern for the Bears now may be the VIX ,volatility index,which is not moving in their favour .

6. The Elliott wave analysis that I have been following - CLICK HERE

It Primarily shows the onset of the 5th wave (may be of the first wave of the Larger 'C'), which may target the support levels mentioned above soon (and may be further below.)

but Alternatively the 4th wave may carry on in a complex correction as shown in the chart below (Blue scenario).This will effectively mean a range bound trading between 5400 and 5600 till expiry of this series.

7. All the favourite Blogs and analysts are on the Bearish side right now (including me ), this cautions us that though the Markets are weak and may eventually breakdown to sub 5000 levels but it may hang on in this series (as per the alternate EW count above ) and catch out of money option traders and high leveraged traders, on the wrong foot. Keep this observation in your trading plan.

8. So for the precaution of a whipsaw here , we should part book the shorts at important levels and keep 5525 as SAR now . Alternatively have a trading s/l for the short positions and ride the flow down.

9. An interseting observation for the Bears - A Probabale Head and Shoulders pattern may be forming which will bring lots of 'Honey' for the Bears ahead.


mynac said...

Dear AAR VEE,Thanks a lot....huge 20lac addition in 5400 CE when Nifty has not yet broken 5400 is fearful,when Nifty precariously close around 5440.let us see.

Rajib said...


When "All the favourite Blogs and analysts are on the Bearish side ..." market does just the opposite :P.

But hardly I've seen most of my favourite analysts (ofcourse including you) go wrong on the direction ... it's just the duration and pattern of the correction that deceives. Result - whipsaw.


AAR VEE said...

Hi mynac-
Nice of u to give the input.Lets see tmrw.These days O.I. also getting whipsawed on daily basis :)

AAR VEE said...

Hi Rajib,

Nice to see u back.

Just was taking it as a caution ,contra indicator.Keeping a chance that the downmove is delayed for this series.

hope to see ur blog now updated every week ??

bizagra said...

Dear Aarvee, it is ok to wait for 5350 for exiting shorts??inspite of no momentum in fall?or can we use a near sar??i m asking positionally only.Thanks

AAR VEE said...

Hi bizagra,

The trend is down for sure,u can trail by keeping a s/l of 2 day high or as per ur risk profile. But its always prudent to part book and keep some profit aside .

I have also mentioned an alternate EW view in the post ,where it may trade in range till this expiry.

please go through the post again carefully ,u will get ur answers .:))