Sunday, July 17, 2011
Technical Watch for Nifty
Nifty is in consolidating phase as metioned in last weekend post. Nothing much has changed on the broader technicals . The consolidation may continue for this week too, testing and rewarding the patience and discipline or can give a breakout trade one way. Lets check the Technical Insight for this Week .
1. As mentioned in last few posts , Broader movement of Nifty is within a Triangle. Now a Rising Wedge pattern is develpoing on the Daily charts. This is a bearish pattern and one should be cautious of the break of the lower trendline.
2. After Trading below the 5day lowema , Nifty is back in the consolidation and trading range of 5d highema and 5day lowema. Closing above/below this range will signal the start of a breakout. for near term. Approx. values for that will be 5630 and 5550.
3. The Options data indicates to a good support at 5500 levels by accumulation of Open Interest above 1.0cr at 5500 puts , similarly the largest O.I. on Call side is at 5700 indicates a Resistance here. 5600 remains a conflict level ,where calls exceed the puts giving a downward bias. Break of 5500 will be quite bearish and will give a fast trending downmove.
4. The Broader Range is bound by 200dma at apprx. 5730 level and 50dma at apprx. 5500 level . A bigger trending move is expected in the direction of breakout above /below these levels.
5. The Elliot wave analysis suggest the ongoing correction of wave 'b' within a larger correction of wave 'B' . The wave b is in its second leg (Red scenario) or third leg (Blue scenario) making it all the more difficult to call the exact direction in near term .
Break of 50dma and 5500 level may suggest an alternate scenario of completion of B wave at 5740 and onset of larger C wave down which may be in its 2nd wave now.
6. An easy way out is to keep the SAR at 5630 as per 10d Volume Profile and trade for the important levels mentioned above.
Time to trade light and grind your axe patiently till a Breakout trade happens. Be prepared for whipsaws and false breakouts by using the stoploss .