13 February 2012


Hi Friends,

NIFTY has been moving constantly higher in a rising channel and the trend still looks to be strongly Bullish.. But now as we have a good rally of 800-900 points a short term correction of 200 points is a good healthy correction for further up-move. While RSI showing Negative Divergence, a DOJI close on weekly chart is the first sign of the rally losing momentum. Further while NIFTY has crossed its OCT High of 5399 but SENSEX has not yet crossed its OCT High of 17908.

So this range of 5322-5427 is non trending range and no new positions are advisable to be taken within this range..

Some reasons why this rally to take a pause and expect a correction :-
1) DOJI Close on Weekly Chart
2) RSI Showing Negative Divergence
3) NIFTY retraced almost 50% of its fall from 6338-4531. (Retracement @5435) 
4) Wave 3 looks complete here.

So at this current juncture I have two alternatives in my Mind :-

1) BULLISH ALTERNATIVE -  Considering the Complex Corrective got over at 4531. I have labeled this rally as an Impulse where wave 3 looks to be complete at 5427. So a correction in wave 4  is expected till 5210 where there is strong support. After retracing in wave 4 down Nifty will resume its Up Trend and head to 5650-5700 to finish 5 wave Impulse thereby completing wave 1 on larger degree.

2) BEARISH ALTERNATIVE - Considering this rally as an Expanded Flat Corrective I have labeled 4531 as Wave A & 5427 as Wave B. Now the sharp down move in wave C shall take NIFTY to 4250 or lower.. So while this down move starts a first leg will be a 400-500 point drop to 4940-5040 beginning from next week.

Currently I'm placing equal probability for Bullish & Bearish Alternatives. So I will simply wait and watch how the Market is moving in next couple of weeks..

Considering this Rally as Bullish shorts to be taken only below Weekly low of 5322 with the stop loss of 5380 for a target of 5210.. If NIFTY holds 5200 a fresh buy can be initiated depending on the structure of this correction.. So A fresh buy will be given only if 5200 is held.. Or in case this rally continues to go above weekly high of 5427. 

Below 5200 it can head to 5140 or till 5080 considering this Rally to be Bullish.. 

Holding on to 5200 will show the strength of Bulls.. 

But if NIFTY breaks below 5080 I will consider the Bearish alternative and then aim for 4250 or lower.

So lets wait and watch for the next couple of weeks..




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