Sunday, July 3, 2011

How to Trade Nifty Next Week ?

There has been a consistent Upmove since the recent low of 5195 and Nifty is looking overheated . There may be some cooling down before any move of consequence unfolds . In general, the Next Week may be of a short term correction and consolidation within a range. Let us checkout the Trading Insight and important Levels for trade now .

1. Indicators :

The Weekly chart is Neutral to Positive in bias , trading above the Mid B.B. of 20wma and targeting the Top B.B. at 5900 level.

The Daily chart is Overbought , trading near the Top B.B.

2. Trendline and Pattern :

Nifty is trading in a Triangle pattern since the start of the year and now is again reaching the Top Trendline which is expected to offer some Resistance.
Break and trading above this Trendline will be Bullish for Medium term too.

3. Fibonacci & MA Levels :

The chart below shows the important Fibonacci and Moving average Supports and Resistances levels . There may be consolidation between the 50dma and 200dma now.

4. Volume Profile :

The 10d Volume Profile shows no apparent selling at the top which may imply that any downmove now may just be a consolidation for 'buy on dips'  for a further upmove in short term.

5. Option Analysis :

Its the start of the July series so the data may not be sufficient to predict the outcome but largely the 5300-5400 level looks like a good Support and 5800 level as a Resistance. The Builtup of Open Interest at 5500 Puts and that at 5700 Calls indicate a likely trading range of short term .

6. FII Data :

The FII's have been consistent Buyers lately and have ended the June series as Positive by some big buying in the last week .

This liquidity flow if maintained may have an impact on the Medium term oulook also .

7. Elliott Wave Analysis :

Please check out the Basic EW count and a probable Short term count followed by me - CLICK HERE

As per the Preferable Count , we may now be in the 4th wave of the 'a' leg of the larger B wave of the second zigzag.
(If indeed its a B wave then it is doing a good job of sucking, as calls for a new high and crossing of 6000 levels are already flying around.)

Alternatively to keep an unbiased view , I checked the Weekly charts for a larger picture and found that we may be in a 4th wave (may have ended recently) since 2009. The 4th may have ended in a copybook Flat correction of 3-3-5 subwaves and wave 1 of the 5th has started (check the positive diversion ). It may also end in a Triangle as a-b-c-d-e with current leg as 'd' .

It is on a crossroad as per the EW counts for the Medium & Long term outlook  but as of now not jumping to any change in  Preferable count and just trading as per short term view here.

The Strategy for Trading the next week should  take care of following points as the data and insight above suggests -

- The Short term Bias is Up with no signs of weakness .

- The larger Trading range may be 5750 - 5500 with maximum action in 5520-5650 range.

- Closing above 5750 and below 5480 may decide the Bullish/Bearish bias further.

- Positional shorts below 5450 only.

- 5530 is  a High Volume node as well as apprx. 5Wema and 50dma . One may keep this level as SAR for the next Week.

Buy on dips for futher upmove in near future can be done with a strict s/l of 5480 closing basis , for a good risk-reward.

Have a Profitable Week ahead !!!


mridul said...

again all points perfectly mentioned thanks. in hrly chart it is oversold so up for few hrs and daily chart overbrought so down for few days as u mentioned minor corrections and weekly chart on up trend so nifty up for the moth in consideration...this is my observations rest nifty can answer .

AAR VEE said...

@ Mridul,

Thanks for sharing ur view,

Just keep in mind that O/S AND O/B conditions of indicators can remain so for a long time ,so trade them with confirmation of price and secondly the TF one is trading ,the higher TF are for reference only.

piyush sharda said...

nice rv. the whole of a(of probable zigzag since 5195) might have also ended at 5705. might not make a very large difference. alternate count also interesting.
the most imp thing is sar of 5530 which matters for a/c

Anonymous said...

hi aarvee i am the follower of ur blog from past some months i have 1 quest. if it is end of 4th wave indeed from 2008 low, then crossing which level would confirm it? 6100+? thanks....

AAR VEE said...

Hi PS,

sure u are right ,'a' may have ended at 5705 with 5 waves completion.
Ya looks like following short term swings and SAR and holding tight for a larger trend may be the order of the day.
This B can continue the whole of this series (and longer) though, giving some SAR whips

AAR VEE said...

@Anonymous -
Frankly i am still not considering it that way ,though time elapsed and % of correction since Nov 2010,along with a triangle pattern (generally seen in the 4th) are drifting the attention towards a 4th wave.

Ya confirmation may be above 5125(which will be in excess of 138.2% extension for a irregular B of the preferable count ) ,but would be too late ,may be the triangle trendline break (now at 5725-50 appx) and trading above 200dma(5750) should make us seriously look for this option . I would also like the monthly slow stochs to turn up (from sell in neutral zone now).

AAR VEE said...

sorry ,typo-
i meant 6125 in above comment


Dear Aarvee!

As usual its like a educational movie to watch ur analysis, keep it up.



jigs said...

Nice simple analysis Rajeev.
Nifty on friday penetrates above BB TOP simple rule to trade BB is short when nifty penetrates BB and close below 5sma. 5sma is very one should keep close watch and take short after nifty close below 5sma with stoploss of recent BB top

AAR VEE said...

@ Kumar ji -

Its very nice and encouraging of u to comment using such words of praise.
The movie will become hit only if it helps people earn money ,here the box office report is based on the money going in people's pocket rather than out of it for buying a ticket :))
Thanks and regards

AAR VEE said...

yes,its a correct startegy of combining the indicators with price action .
Another way of doing it may be shorting below 5dhema with s/l above friday's high (but here the s/l becomes far away ) or simply try the ORB break if opens higher than last session.

Thanks for sharing the startegy and keep them coming.

Shradha Saburi said...

thank you Aarvee sir, nice explanation.

AAR VEE said...

Welcome SS

piyush sharda said...

looks like the 5th wave u mentioned....

piyush sharda said...
This comment has been removed by the author.
vj said...

Hi Aarvee in Volume Profile chart for intraday which is the best time frame to b used?

AAR VEE said...

Hi PS,

Ya looks like the 5th as 4th that started last week ended as a triangle a-b-c-d-e in hrly charts,which gace a breakout above the downtrendline at apprx. 5645 .
(may be 3rd of the 5th also ended/about to end).
It didnot break the previous resistance of 5605.
Now apprx 5625 can be SAR moving ahead.

since is updating i am having problem saving hrly chart and posting.:(

AAR VEE said...

Hi VJ,

Have not traded intraday using vol. profile but one can mark the imp HVN of higher TF and then trade with 1d/5min profile for supports and resistance.

I normally use it for swing and positional trades.

vj said...

Thanks aarvee, above 5750 close next big event :)

mridul said...

hi expected nifty overbrought on daily chart and was down for days and weekly indicators for uo so up for the week.