Ever since the breakout in Nifty 2 weeks back, it has been pretty much in correction-mode, correcting from 5350 to almost 5168 on 12th Nov, 2011. This is not what a healthy breakout is supposed to look like. 5165 was the resistance (the top level in the sideways trend from mid-August to 24th October, which was broken on 25th October). On the way down this level is now a support (Attendees of “Basics of Technical Analysis” will recall this as a classic example of prior strong resistance turning into strong support).
Although, the short-term uptrend does not look healthy (and a little broken, in fact, especially on a daily chart) after the Friday’s session, the only saving grace was that it closed above 5165 on both the daily and weekly charts (weekly close is always very important for looking at the bigger market picture). Moreover, the overseas markets (Dow, Nasdaq etc) went up above 2% on Fri raising hopes that the markets will rebound on Monday. Which way the markets will go is anyone’s guess, but one thing is clear. Until the overhang of the Euro-zone crisis is over, the market will keep facing hiccups. From our side, we are a little bullish short-term mainly because the strong support of 5165 was maintained on Friday both on daily and weekly charts, but any close below 5165 on a daily chart would change the bias towards the downside. In the long-term, we are of course still in a downtrend until the long-term down-trend line is broken on the upside on a weekly chart.
And what about the recent volume breakouts? We’ll post about them in a followup post with some thoughts on some stop-loss strategies.
wonderful analysis,indeed looking sound on the trand line basis.However,the Elliottcians are of different opinions in relation to the CORRECTION is over or not?On 26th August,when Nifty kissed the lowest of the year,we have come up almost 700 points.Does’nt that giv us an inkling that correction is over and we are on a fresh bull move.If you try to count the waves from a bull’s perspective,you can easily see the bulls overpowering slowly.5165 was the only hope for the bears which I think will be well protected by the bulls.My target is at least 5450.
Thanks for the elliot wave perspective. Our purpose of posting is to stimulate a healthy discussion so that all readers can read the views and learn how to make better decisions. We feel it is better to go bullish for the long-term only once the long-term downtrend is broken rather than solely relying on elliot wave perspective. Till then we stay short-term bullish (based on factors mentioned in the post) till the 5165 is broken out to the downside.
good written