pushkan
5th January 2009, 11:39 AM
PACE FINANCIAL SERVICES
For Private Circulation Only
January 05, 2008
Cautious Outlook, Time Cycle turns.
Weekly Analysis
Last week, the Nifty showed opposite movements as compared to the previous week. We found the Nifty testing the first support level of around 2800 by making a low of 2812 last Monday. The week ended 26/12/2008 showed an engulfing bear pattern on the weekly charts. But last week’s candle ended 02/01/2009 showed an equally strong weekly Piercing Line candlestick pattern emerged. The high of the earlier Engulfing Bear still has not been crossed, which stands at 3110.
As a result of last week’s Piercing Line, the low registered last week becomes equally important. The low registered last week was 2812. The Engulfing Bear candle’s high, as well as high of last 3 weeks, stands at 3110. We were expecting that Nifty may test lower levels in last week as the Time Cycle changed last week. With a buffer of one week, we may still tend to have a retracement first and surrender the gains later. The pattern would change only if Nifty maintains above 3110 in weeks to come and not just for one week. However if the Nifty falls and closes below 2800, then wave c completion gets confirmed.
Weekly resistance will be at 3110-3150 and 3205. Weekly support will be at 3000-2800 level and outwardly at 2700.
Yearly Outlook for 2009
As a result of last week’s move, we had the closing acting exactly at levels maintained on last Monday. Yearly Support Level will be at 2000 and Yearly Center Point will be at 4150. The Yearly resistance level will be at 5200
Future Projectile
1) We may move to a level of 3100-3200 (Time Cycle target around first week of Jan, still holds).
2) The market may then fall to 2700-2800 levels. Possibly below 2800, which would breach the low of 29/12/2008. This could go on till 2nd week of Jan, where an intermediate bottom could be in place. This may also discount the initial bad results of Dec Q.
3) Thereafter a likelihood of market rising to 3500-3600 till Feb last week - Time Cycle 2.
4) After this the market may fall substantially and may test 2500 - 2200 -2000 in that order. This would coincide with the Time Cycle 3 in Apr-May 2009 (Around 9 -11 weeks of downtrend)
Chart 1: Nifty - Support Zone : Neutral Zone : Resistance Zone
2250-2500: 2770-2950: 3071-3250
Strategy for the week
Traders holding long positions can book profit on rise to weekly resistance levels and trail all long positions with a trail level of 2990. Traders can create shorts, if 2990 is breached for targets of 2800-2700, in that order. These views are more valid for index based large cap stocks.
Distribution in Midcaps
In the last 3-4 weeks, CNX Midcap has outperformed the large cap based CNX Nifty. The relative outperformance is depicted in the chart. Such a movement, accompanied by high volumes; especially in bear market rallies indicate a distribution happening in the midcaps.
Extreme caution is advised in the Midcap counters, as they may get heavily plummeted even with a small fall in the large cap Nifty index.
Chart 2: S&P CNX Midcap vs S&P CNX Midcap
For Private Circulation Only
January 05, 2008
Cautious Outlook, Time Cycle turns.
Weekly Analysis
Last week, the Nifty showed opposite movements as compared to the previous week. We found the Nifty testing the first support level of around 2800 by making a low of 2812 last Monday. The week ended 26/12/2008 showed an engulfing bear pattern on the weekly charts. But last week’s candle ended 02/01/2009 showed an equally strong weekly Piercing Line candlestick pattern emerged. The high of the earlier Engulfing Bear still has not been crossed, which stands at 3110.
As a result of last week’s Piercing Line, the low registered last week becomes equally important. The low registered last week was 2812. The Engulfing Bear candle’s high, as well as high of last 3 weeks, stands at 3110. We were expecting that Nifty may test lower levels in last week as the Time Cycle changed last week. With a buffer of one week, we may still tend to have a retracement first and surrender the gains later. The pattern would change only if Nifty maintains above 3110 in weeks to come and not just for one week. However if the Nifty falls and closes below 2800, then wave c completion gets confirmed.
Weekly resistance will be at 3110-3150 and 3205. Weekly support will be at 3000-2800 level and outwardly at 2700.
Yearly Outlook for 2009
As a result of last week’s move, we had the closing acting exactly at levels maintained on last Monday. Yearly Support Level will be at 2000 and Yearly Center Point will be at 4150. The Yearly resistance level will be at 5200
Future Projectile
1) We may move to a level of 3100-3200 (Time Cycle target around first week of Jan, still holds).
2) The market may then fall to 2700-2800 levels. Possibly below 2800, which would breach the low of 29/12/2008. This could go on till 2nd week of Jan, where an intermediate bottom could be in place. This may also discount the initial bad results of Dec Q.
3) Thereafter a likelihood of market rising to 3500-3600 till Feb last week - Time Cycle 2.
4) After this the market may fall substantially and may test 2500 - 2200 -2000 in that order. This would coincide with the Time Cycle 3 in Apr-May 2009 (Around 9 -11 weeks of downtrend)
Chart 1: Nifty - Support Zone : Neutral Zone : Resistance Zone
2250-2500: 2770-2950: 3071-3250
Strategy for the week
Traders holding long positions can book profit on rise to weekly resistance levels and trail all long positions with a trail level of 2990. Traders can create shorts, if 2990 is breached for targets of 2800-2700, in that order. These views are more valid for index based large cap stocks.
Distribution in Midcaps
In the last 3-4 weeks, CNX Midcap has outperformed the large cap based CNX Nifty. The relative outperformance is depicted in the chart. Such a movement, accompanied by high volumes; especially in bear market rallies indicate a distribution happening in the midcaps.
Extreme caution is advised in the Midcap counters, as they may get heavily plummeted even with a small fall in the large cap Nifty index.
Chart 2: S&P CNX Midcap vs S&P CNX Midcap