Detailed Nifty Analysis 1 Dec 10

Flashback, First. On 21 st Sep 10, we sent a file to over people via different networks and lists. The file can be still downloaded at In that at zone we CLEARLY said that long term target as per technicals is hit. Rest is history.

Nifty Long Term Chart Nifty Long Term Chart: At 4400, we used to suggest target Now that is hit. What next? There is not enough statistical data available that can ascertain the forward movements. A 400% rise then 60% fall has only happened once since 1980 – 1994 (scam). As you can see, markets retraced the prvs high and even made a higher high but remained in the range of effectively. After very long term consolidation, the range broke and markets went up from 1500 to 6300 in a few years! Globally, after any big rise-fall cycle, there happens a rangebound consolidation which takes LONGER THAN THE TIME TAKEN FOR THE MOVEMENT. So, our view remains that in the long term, market might remain rangebound for sometime. Maybe when the world economy becomes “BULLISH”, the range might break and we might be headed towards 10k or 15k on Nifty. But that will take time. Conclusion from the long term chart basic analysis: 1) The long term bullishness is still over. 2) The very long term bullishness is maybe intact. 3) May follow decade.

Observations: 1)Rangebound movement after a huge rally of 5555 to has been spotted. Rangebound movement after a rally has in past been an area of selling. 2)M Pattern at )Supports broken at 5810 and a pullback post that has happened, indicating a clear decline in the momentum.

Technical & Psychological Observations Market consolidated in the range of for a short while after having a huge breakout of Usually, a consolidation at bottoms is a buying area, and so is vice-versa. The lifetime high has NOT yet been broken and Nifty is close to that. We are of the view that after a huge rally from Year 2004 to 2008, and a biggest ever crash, Nifty CANNOT move out of this range. It might see a higher high, but that should be marginally higher only. Only FII has been buying stocks, and buying only those stocks which public wont buy. The ones people were addicted to, are still at scary lows. Its now that people have shifted out from the NOT stocks to HOT stocks. It should be noted that FII’s love is usually seasonal. It has to exit, and to exit, it needs YOU to buy. So, as per research, there will be huge ups and downs and public will benefit in these stocks. Once they fall in love and marry these stocks, there will be a divorce.

Technical & Psychological Observations Once Nifty creates a fresh high, you will find a lot of “investors” gushing in. This will create a sense of ease for the big player to exchange stocks with money. So we do expect high volatility (2 waves) and a higher high. A lot of people argue that stocks like RNRL and ISPAT have not rallied so this is not the end of rally. We would like point out that May2006 crash happened only in largecaps and mid & small caps did not participate the way they did later. So, in this case also mid and small caps will rally ONLY after few huge crashes, and that would be the completion of this bull run. The time spent at 6000 zone is not yet enough for the player to exit. So we expect significantly longer consolidation than what it has been till now.

Technical & Psychological Observations Technically, there is a M formation in zone, which means this could be a start of bearish movement. Nifty broke its upperchannel support and bounced as a wolfe wave post that, indicating atleast a decline in the momentum, which usually results in totally flattish movement followed by a dip. So summing up, there are variety of factors which tell us that though it could be almost a ceiling, it will still make atleast 2 waves of giant swings and followed by a correction eventually. Nifty can make newer highs but not significantly higher high.

The Scenario Having seen US closely since 20 years, it seems US is finally changing roles. After making the world work for it and branding it as “OUTSOURCING”, US is finally up and wants to become a producer not just a consumer. Desperation for work, Desperation for jobs, Obama coming to India to sell Boeing planes all indicate that. Metro-India on the other hand is becoming consumer of rolls royce, boeing, etc etc. So roles are changing. But the big question is: Can India grow alone? The other important factor is: US has become cheap. At highs amidst euphoria, people forget one important thing: Relative Valuation. India right now is the only investment destination. The good thing is that the major portion of India is still under developed (rural), so growth should continue.

The Scenario The country is in grip of corruption these days and this seriously injures the spirit of investing into India. The problem today is not money, but implementation. In the past it has been seen that whenever a rally happens, DII starts selling. Selling like a stupid. At the top, suddenly it buys huge, and a few days later, markets correct. This pattern has occurred multiple times. If we believe the NSE BSE figures, the same has been happening right now. DII is buying.

Summarizing The short term trend looks bullish and it will not surprise us even if we have a new high. There should also be wild swings and the 640 point Nifty fall has just made our view more concrete. Eventually there should be a significant correction which would take nifty to much lower levels. DII buying and FII selling is another clue to that. All the upward movements should be considered as pullbacks, and investments might atleast be trimmed or hedged in this zone. One can go long in Nifty on declines SL There could be some ups and downs in between but 6503 looks quite very possible.

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Nifty and ActiveTrades Longed at 5380 for tgt hits Longed at 5480 for tgt hits, sold SL 5565 Covered at 5350, Went long. Booked long Longed at hits Note: 5380 long, 5552 short, 5565 long were given vide PPTs and articles. Rest other were delivered real time to clients and social networks.