04 February 2014: Nifty Elliott wave analysis: Another brutal gap down coming. Nifty to get support only in the range of 5930 to 5900 now. We are at 4 month’s low and heavily oversold in short term.

You must read previous articles and watch the given chart carefully to understand this article completely.

For 04 February 2014: -

On 03 February 2014, FII Sold INR 735.73 crs and DII Sold INR 70.35 crs

It is all around panic in the lack of even single good news in stock market. DOW market tumbled last night on the fear of returning of slowdown in economy. Eventually, DOW JONES has closed below 200 DMA. So, we are on another gap down now.

I always say that gaps are most troubling part of trading. Nifty has slipped from 6355 to looking like 5930 by today. Nearly 25% fall goes in gap down. Nifty has 200 DMA at 5973 which is also supposed to be taken out in gap down.

It is looking like global market including India too is going through chaos and extreme panic like situation. This is definitely not needed and not going to last forever. As it has slipped from nearly all time high and coming at 200 DMA in just 8 days we can say that its heavily oversold in short term.

Nifty has support at 5970 which will not be there to act at opening due to gap down. Then next levels will be 5930 which may come into play. Do not think that stock market cannot rebound. Remember 28 August 2013 when Nifty hit a low at 5118 and since then it hit 6420 as top. Even at that time it was looking like Nifty cannot hit 5400.

I cannot quote the reasons for rebound but whenever it comes it will be sharper than the fall. Indian market has history of doing this.

Strategy for Nifty February future – Nifty February future is very likely to see a gap down of 70 points. Then we will not have anything to trade anymore. Expect some technical support at 5950 to 5930 zones. There is just one way to trade – if Nifty start forming higher high and higher low on 5 minute intraday chart. Avoid shorting market now. Visit my intraday update to see concluding trades.

S&P 500 (USA) – It was hunted beginning for the month of February as US economy data fear the return of slowdown in US economy too. After china, US is getting weaker than expected data. It has broken 1768 levels and crushed to close at 1740. There were times in US market when equity price was looking like it can never fall and now it looks like it can never gain. This is the time to quote 200 DMA which is at 1707 levels. This is overdone now and recovery can come anytime. There is one change. Now all recovery can get sold at high unless it start closing above 1800 which is really too tough now.

All negative divergence came to play in less than a week.

Regards,

Praveen Kumar