NIFTY - AHEAD OF FOMC

Hi Friends,

While everyone is eying on the FOMC Meet on Wed 18 Mar 2014. Lets look at development on Charts. Nifty tested 6575 and closed near 6515 giving a Shooting Star Formation with Negative Divergence on RSI. Which could be the sing of short term Trend Reversal.

NIFTY

As mentioned in my previous post currently there are two alternatives open.

1) The rise from 5933 looks Impulsive and could be part of 3rd wave if we consider the move from 5118-6415 as Leading Diagonal. That means Nifty completed the contracting triangle after 6 years consolidation and we are starting a New Bull Market which could take Nifty to uncharted territory. In case of Wave Equality the 3rd wave might take Nifty towards 7300. However, we need a confirmation by break above the weekly channel resistance near 6650.

2) Another alternative of this rise being a part of the corrective wave from 4531 over last 2 years as I have been always mentioning in all my previous posts. In this case Nifty shall respect the weekly channel resistance near 6650 and start declining towards the lower end of channel near 5700. And below 5700 downside is wide open.

Currently Index is overbought and some correction looks on cards. Once below 6490 pullback to 6430-6360 might be on cards. After which Rally may resume in case of New Bull Market. However, fast fall below 6212 will invite a huge downside to 5700 and much lower.

As mentioned in previous post Pharma & IT stocks have already started correcting. In case of downside in Index Auto, Pharma & IT stocks are expected to crack heavily along with Capital Goods and Banking stocks.

As per the study of wave personality and guidelines I still doubt the start of New Bull. Also Triangles are typically found in 4th wave of an Impulse and wave 2 are often zigzag or combinations. However, one should not be biased in order to take right trades. So I would suggest to go with the flow.

Source : Harish Dixit

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