Nifty Weekly Analysis

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http://www.thetradingsolutions.com/wp-content/uploads/2009/12/121409nifty.bmpNIFTY
Summary

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Highs/Lows: Last 30 days: 5182.55/4806.70, Last 6 Months: 5182.55/3918.75, Last 12 Months: 5182.55/2539.45


With the medium term view presented earlier still intact, we are zooming in on the current situation this week.

Although we have already completed the B wave requirements for an expanded flat – i.e., 90% retracement of wave A – yet the internal structure of the c:B wave indicates a further possible rise before we see a move down for the C wave. For the current week, we would consider pull backs to around 4996, 4951 and 4888 as short term buying opportunities, after we get low risk, high probability buy signals. We will be targeting the 5322, the 5414 and then possibly the 5490 levels. A break below the 4806 level will, however, confirm that we have already seen the completion of the B wave of the flat and a possible downward move has already initiated.

Edit by Moderator: We are open to exchange of thoughts. But no Advertising please.

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http://www.thetradingsolutions.com/wp-content/uploads/2009/12/122109nifty1.bmpNIFTY
Summary

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Highs/Lows: Last 30 days: 5182.55/4806.70, Last 6 Months: 5182.55/3918.75, Last 12 Months: 5182.55/2539.45


With the lows of November 27 (4806.70) still in tact, our preferred count, as depicted in the main image, expects an upward move to complete the c:B:4 wave, before we start the downward move for the C:4 wave, likely to go down in the vicinity of 3910. However, prior to that, in the currently preferred scenario, our expected target for the termination of the wave c:B:4 is close to 5400.

Nevertheless, to avoid being frozen if found on the wrong footing, we must keep the alternative count in view as well. As presented in the second image, our alternative count views the B:4 as having completed on the December 11 high and we have already started the five wave downward move to complete the C:4, with a target at around 3910.

http://www.thetradingsolutions.com/wp-content/uploads/2009/12/122109nifty2.bmp

With our preference towards the upside, we shall be looking for the emergence of low risk, high probability buy signals between the current price levels (4987.70) and the November 27 low of 4806.70, to take short term long positions. A break below 4806.70 will change our short term bias towards the downside.

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Summary
http://www.thetradingsolutions.com/wp-content/uploads/2009/12/122809nifty1.bmp

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Current Position: Bullish since 4,999.32, 4,953.56
Highs/Lows: Last 30 days: 5182.55/4806.70, Last 6 Months: 5182.55/3918.75, Last 12 Months: 5182.55/2539.45

The market moved almost exactly as anticipated in our last report. There is no change in our outlook presented in the last week. The coming week/weeks should see the prices rise further – most likely close to the 5,400 to 5,500 levels – without breaking below 4,943. Any pull backs in the coming days should be seen as short term buying opportunities, with stop levels at the 4,943 level. If we are correct in our assessment presented in the main image, we would be expecting the third wave (iii.c.B) of the c of B wave. This would mean that we should see the swiftest and the longest part of the current move upwards during the upcoming days.

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Summary
http://www.thetradingsolutions.com/wp-content/uploads/2010/01/010410NIFTY1.bmp

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Current Position: Bullish since 4,999.32, 4,953.56
Highs/Lows: Last 30 days: 5221.85/4806.70, Last 6 Months: 5221.85/3918.75, Last 12 Months: 5221.85/2539.45


With the price making a new high first on December 29, 2009 (5214) and then on December 31, 2009 (5221.85), the market has moved as expected. There is no change in our assessments from the last two weeks. The updated chart as it appears at the end of the last week is attached herewith.

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Summary
http://www.thetradingsolutions.com/wp-content/uploads/2010/01/011110NIFTY1.bmp

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Current Position: Bullish since 4,999.32, 4,953.56
Highs/Lows: Last 30 days: 5310.85/4806.70, Last 6 Months: 5310.85/3918.75, Last 12 Months: 5310.85/2539.45


We did not get the pull back that we expected during the last week. The index made a new high at 5310.85. The picture at the end of the week is slightly confusing as a number of alternative counts may be presented for the current scenario. For now, we, however, prefer a conventional five wave impulse rally forming in the B.4 wave. With this scenario, we would expect the initial move during the upcoming days to be downwards with potential reversal points around the 5173, 5129 and 5084 levels but holding above the December 21, 2009 lows at 4942. Subsequently, we would expect a resumption of the rally making new short term highs.

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Summary

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Current Position: Bullish since 4,999.32, 4,953.56
Highs/Lows: Last 30 days: 5310.85/4806.70, Last 6 Months: 5310.85/3918.75, Last 12 Months: 5310.85/2539.45

http://www.thetradingsolutions.com/wp-content/uploads/2010/01/011810nifty1.bmp
We did get a downward move during the week, as was anticipated in the last week’s report. However, the January 13 low (5169.55) can presently be seen as either the completed correction or just one leg of it. In our preferred count, we have considered the January 13 low as wave ‘a’ of the correction, with a ‘b’ and ‘c’ wave of this correction yet to be completed. With this scenario, we would expect the upcoming days to take the index below January 13 low of 5169 – possibly to around the 5129 and the 5084 levels – while keeping above the December 21 low at 4943. However, with our short term outlook being sideways to up, we would consider any downward moves, keeping above 4943, as buying opportunities targeting 5400, 5475 and then 5500.

A break below the 4943 level will force revision in our shorter term outlook of the index.

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Summary
Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Current Position: Bullish since 4,999.32, 4,953.56. Change to bearish at a break below 4943.95.
Highs/Lows: Last 30 days: 5310.85/4806.70, Last 6 Months: 5310.85/3918.75, Last 12 Months: 5310.85/2539.45
http://www.thetradingsolutions.com/wp-content/uploads/2010/01/012510nifty1.bmp
Although the move down during the last week has not yet nullified our assessment of the market presented during the last few weeks. However, considering the depth of the downward move on the last day, when the market came perilous close to the 4944 mark, alters our preferred medium term outlook for the market from ‘up’ to ‘down’. As the main image shows, we are now forced to consider the January 6, 2010 high (5,310.85) to be the completion of wave B.4 in an apparent formation of an expanded flat for the whole of wave 4. If this is correct, then the upcoming days are likely to see the index fall to below the November 3, 2009 lows (4,538.50), preferably close to the 3,845 mark.
http://www.thetradingsolutions.com/wp-content/uploads/2010/01/012510nifty2.bmp
Nevertheless, as stated earlier, our medium term bullish outlook has not yet been completely nullified by the market action. However, after Thursday’s price action, it seems more likely that if any further rise is to come, it will be in the shape of what the Elliotticians call an ending diagonal, with a possible wave 1.v.3 ending at the October 20, 2009 high at 5181.95, wave 2.v.3 ending on the November 3, 2009 low at 4538.50 and a possible wave 3.v.3 ending at the January 6, 2010 high at 5310.85. If this scenario is correct, we would then expect to see the end of wave 4.v.3 in the vicinity of 4,910 – with a maximum cut off point above 4665 – from where we will expect to see a rise to new highs to complete the 5.v.3.

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Summary

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Highs/Lows: Last 30 days: 5310.85/4766.00, Last 6 Months: 5310.85/3918.75, Last 12 Months: 5310.85/2539.45

http://www.thetradingsolutions.com/wp-content/uploads/2010/01/020110nifty1.bmp
The week saw a further slide down to the 4766.00 mark during the week ending January 29, 2010. We have still not broken below the 4661 mark, which allows us to keep both the outlooks presented in the last week’s report without any change. As the main image shows, we are now forced to consider the January 6, 2010 high (5,310.85) to be the completion of wave B.4 in an apparent formation of an expanded flat for the whole of wave 4. If this is correct, then the upcoming days are likely to see the index fall to below the November 3, 2009 lows (4,538.50), preferably close to the 3,845 mark.
http://www.thetradingsolutions.com/wp-content/uploads/2010/01/020110nifty2.bmp
However, as a less likely shorter term bullish outlook, it seems more likely that if any further rise is to come, it will be in the shape of an ending diagonal, with a possible wave 1.v.3 ending at the October 20, 2009 high at 5181.95, wave 2.v.3 ending on the November 3, 2009 low at 4538.50 and a possible wave 3.v.3 ending at the January 6, 2010 high at 5310.85 and a possible wave 4 at the January 29, 2010 low at 4766.00.. If this scenario is correct, we would then expect to see a rise to new highs to complete the 5.v.3, without breaking below the 4766.00 mark.

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Summary
Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Highs/Lows: Last 30 days: 5310.85/4692.35, Last 6 Months: 5310.85/3918.75, Last 12 Months: 5310.85/2539.45

http://www.thetradingsolutions.com/wp-content/uploads/2010/02/020810nifty1.bmp

The main chart (Nifty Weekly chart) presents our longer term perspective on the index. With a longer term wave 1 completing at the 01/11/08 high (6357.10), followed apparently by a double zigzag to complete wave 2 at the 10/31/08 low (2252.75). Since then, so far, we seem to have completed three waves of a possible resumption of a long term up trend, with the third wave completing on the 10/23/09 high (5181.95), followed by wave a.4 at the 11/06/09 low (4538.50), wave b.4 at the 01/08/10 high (5310.85) and is now in the process of forming wave c.4 to – most likely – complete the 4th wave of the advance since 10/27/08. If this is correct, we would expect the fourth wave to come down to roughly the 3,900 level or lower. However, after the completion of this fourth wave, we would favor another rally to highs above the 10/23/09 high (5181.95).

http://www.thetradingsolutions.com/wp-content/uploads/2010/02/020810nifty21.bmp

As shown in the second image, wave B of the correction has gone higher than the end of the 3rd wave. Such a situation is only possible in two cases: in Expanded Flats and in Running Triangles. Furthermore, keeping in mind that this is a fourth wave correction, the possibility of a running triangle is equally likely as that of an Expanded Flat. In the images, we have given our projections for an expanded flat. Hopefully, the situation will be clearer when we take up writing our next week’s report. However, in either case, the upcoming days are likely to see a correction followed by another sell off. Our first target for the end of wave C is a break below the 4538.50 low of November 3, 2009.

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Summary

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Highs/Lows: Last 30 days: 5310.85/4692.35, Last 6 Months: 5310.85/3918.75, Last 12 Months: 5310.85/2539.45


http://www.thetradingsolutions.com/wp-content/uploads/2010/02/021510nifty1.bmp

Without any change being forced into our basic outlook, we are expecting a continuation of the correction seen during the last week, with a possible completion of a potentially first five-wave sell off at the February 8, ’10 low (4675.40). Since the low of February 8, ’10, we have so far seen a three wave rally, which seems to be too small in time, as well as in price to be considered as a completed correction of the move down since January 06, ’10. It is therefore that we have marked it as a potential wave a of an expected abc correction, which would complete wave 2.4. If this scenario is correct, we would expect a wave b.2.4 sell off to start in the upcoming days, which may take the index close to or even below the February 8, ’10 low at 4675.40 to around the 4635 to the 4610 mark, to be followed by a wave c.2.4 rally, taking the index back above the February 11, ’10 high at 4843.80.

http://www.thetradingsolutions.com/wp-content/uploads/2010/02/021510nifty2.bmp

Our bearish alternative scenario takes the February 08, ’10 low as the first wave of a possible extended fifth wave (second image). As per this alternative scenario, the February 11, 2010 high can be a completed 2.v.C.4. If this scenario is correct, then we are likely to see a steep continuation of the sell off without much more correction in the upcoming days.

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Summary
Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above
Highs/Lows: Last 30 days: 5310.85/4692.35, Last 6 Months: 5310.85/3918.75, Last 12 Months: 5310.85/2539.45

The market continued with an upward move for three more days till it made a high of 4929.70 on February 17, ’10. The move since February 8, ’10 low (4675.40) to the February 17, ’10 high (4929.70) seems to be a three wave move (in a double zigzag), which has either completed wave 2.C or has completed the first leg of the fourth wave, i.e., wave a.2.C. This creates the two alternative scenarios that we shall be presenting in this week’s report.

http://www.thetradingsolutions.com/wp-content/uploads/2010/02/022010nfity1.bmp

As per the first scenario, with only one leg of the fourth wave completing at the February 17, ’10 high (4929.70), we have wave a.2.C at the February 17, ’10 high. The two important factors in favor of this scenario relate both to the depth as well as the breadth of the corrective move so far. Firstly, it seems very unlikely that a second wave would end at correcting the first wave by a retracement of merely 38%. Second waves are generally deeper than 38%. Furthermore, it also seems unlikely that an impulse move lasting 22 days (from January 6, ’10 to February 8, ’10) will be corrected only in 7 days. Thus, with a possible wave a.2.C, in three waves, at the February 17, ’10 high, we can either expect a flat correction or a triangle at this time. However, being a second wave correction, where a triangle generally does not appear, we are inclined towards expecting a flat correction in the making. The b waves of a Flat correction generally retrace around 90% to 138% of the ‘a’ waves. Thus, our first target for the ‘b’ wave of the current correction is around the 4700 level. If the index falls below the February 8, ’10 low, we may see it fall further to around the 4600 level. If our assessment is correct, the end of the ‘b’ wave will see a five wave rise taking the index above the February 17, ’10 highs (4929.70).

http://www.thetradingsolutions.com/wp-content/uploads/2010/02/022010nifty2.bmp

Our alternative scenario considers the February 17, ’10 high as a completed wave 2.C. As per this scenario, a five wave sell-off should be witnessed in the coming days.

In either of the aforementioned two scenarios, we expect to see a fall close to or below the low of February 8, ’10.

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Summary


Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above


http://www.thetradingsolutions.com/wp-content/uploads/2010/02/022710nifty1.bmp

We now seem to be in wave c of the correction that was marked in last week’s report. Having already taken almost 62% of the time taken in the move down from the January 6, ’10 high (5310.85), we expect the current rally to be a part of the final wave (c.2) of the correction. Our current target for the end of c.2 is around the 5065 and the 5176 levels. However, for our current medium term outlook to remain valid, we should get to see a reversal in the index, while keeping below the January 6, ’10 high (5310.85).

http://www.thetradingsolutions.com/wp-content/uploads/2010/02/022710nifty2.bmp

As a less likely short term alternative to the current situation, the current move up from February 8, ’10 may just be the first leg of a more complex wave 2 correction. This possible scenario is depicted in the second image.

In either case, we expect the upcoming days to first unfold a rise close to the 5065 level, followed by a decline close to or below the February 8, ’10 low.

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Summary

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above

Without any significant change in our outlook presented in the previous report, we are expecting the potential corrective rally to exhaust around the 5170 to the 5200 mark, completing what we have marked as wave 2.C. If this is correct, we would expect to see the start of a potentially third wave sell off, which is likely to be stronger and longer than the witnessed from January 6, ’10 high to the February 8, ’10 low. However, for our count to remain valid, the index should not break above the January 6, ’10 high at 5311.

http://www.thetradingsolutions.com/wp-content/uploads/2010/03/030710nifty1.bmp

A break above the January 6, ’10 high is likely to force a major revision to our short and medium term outlook.

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Summary

Long term outlook: Up
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Long Term Revision Point: Break below 2252
Potential Longer Term Targets: 6357 and above

The market has so far progressed as expected. There is no change in our outlook for the current report. Attached is the image of the latest position of the market with the text from our previous report:

http://www.thetradingsolutions.com/wp-content/uploads/2010/03/031510nifty1.bmp

Without any significant change in our outlook presented in the previous report, we are expecting the potential corrective rally to exhaust around the 5170 to the 5200 mark, completing what we have marked as wave 2.C. If this is correct, we would expect to see the start of a potentially third wave sell off, which is likely to be stronger and longer than the witnessed from January 6, ’10 high to the February 8, ’10 low. However, for our count to remain valid, the index should not break above the January 6, ’10 high at 5311.

A break above the January 6, ’10 high is likely to force a major revision to our short and medium term outlook.