Saturday, June 4, 2011

Nifty Analysis

The Markets are giving confusing signals. Let us check them out  and try to put in place a strategy to trade Nifty in the coming Week.

1. The Daily Chart Indicators are giving a Sell signal after correcting from the Over Bought zone where as the Higher Time Frame of Weekly Chart is giving a Buy signal after trading in the OverSold zone.

2. The Trendline joining the lows since 5177 is acting as a Resistance and Nifty failed to break it this Week. Any sustained upmove will come only above it.

3. The Moving Averages of Long Term(50-200dma) and Medium Term(20-50dma) are Bearishly aligned ,where as the Short Term averages(5-20dema) are Bullishly aligned.

Nifty has closed below the Weekly and Daily 5dema but still above respective low emas.
Till there is a closing below 5dlema and a followup specially below Weekly lema of 5450 level , it may trade Rangebound.

4. Nifty is retracing the recent upmove since 5328 - 5598 and is nearing the important 38%-50% zone of 5495-5465 ,which is expected to give a Support.

5. The Options data still shows the range of the last week despite a upmove and correction in this week .The likely range is to remain 5400-5800 in broader way where the  Put and Calls have their respective maximum Open Interest.

6. Though the FII's have turned Buyers since this recent upmove, interesting is to note their buying on the last trading day when Nifty corrected . It is a signal of things to come.

7. As per the Elliott wave theory ,we are in a correction of a correction in a larger time frame . This is a time of maximum contrary signals , whipsaws of any SAR and volatile moves .
The Short Term EW probability that I have been following can the checked  - CLICK HERE

As per it -
# We may be in a wave 2 up of a larger wave C down.

# This wave 2 may have completed a wave A at recent high of 5598 and we may be in wave B of it.

# This wave B has also completed or near completion of an a-b-c Flat correction. This suggests that either the wave B is complete or near completion .Alternately it may carry on a further complex correction of say abc-x-abc etc.

# Wave C of  2 is yet to unfold after the completion of this wave B-2 .  

The above data and analysis can be corelated to trade next week as -

1. Its time to keep positions very light ,till the clear signal emerges.

2. The trades should be fast and nimble as a tug of war is on.

3. Expected range of trade is 5480 - 5640 for maximum period of the Week.

4. Buying can be done in the area of 5465 -95 and exit at 5550- 60.

5. Longs can be carried above 5560 for target of recent high and above to 50dema.

6. Shorts to be formed on close below 5450 for target of 5380 and below.

7. To keep a simple Price level and manage trade about it ,SAR of 5480 can be followed this week.

Note :
There has been a big Political development today regarding Baba Ramdev's agitation , which has all the potential for probable political ramifications .It will be intersting to check out the impact of this news on Markets in the next week . My take is that enough short positions will enter the system this week to create a wave C-2 breaking 5600 on the upside later ,caution is the break of 5380 level on closing basis. 

Hope the above helps you in Trading the next week. Have a Profitable Week ahead !!!

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AAR VEE said...

FIRE said...

Any change in your stance? Or buying around 5480 is still a viable option?

June 5, 2011 10:07 AM
@Fire ,
Keeping SAR of 5480 and managing the trade this week.

Piyush Sharda said...

nice labelling in 5 min charts
and thanx for books too

mridul said...

its always look nice interpretations of all the factors positive or negative. thanks

AAR VEE said...

Thanks PS and mridul

jonak said...

My MOST probable count :::

Rajib said...

Consolidation is easily identified yet we lose maximum money in it ... That simply talks about our impatience in the game! :)

AAR VEE said...

Ya Rajib,

Technically most of the trading systems go for a toss and whipsaws here ,also poor position sizing and money management take their toll :)

Fire said...

" My take is that enough short positions will enter the system this week to create a wave C-2 breaking 5600 on the upside later ,caution is the break of 5380 level on closing basis. "

I was remembering this statement a great deal today. The first part has matched with uncanny accuracy. The next week may well prove the second part right too.

Hats off!

Fire said...

I wanted to say - really a lot of shorts have entered. :P