22 May 2014: Nifty Elliott wave analysis: Yesterday’s low was near to 38% support band of the rally. Break below 7200 on Nifty will give us a dip towards 7130-7100 levels. On higher side, new up move will open only above 7350.

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For 22 May 2014: -

On 21 May 2014, FII Sold INR 266.22 crs and DII Sold INR 439.03 crs

It was another dull close on daily chart even after roller coaster ride during intraday session. It saved the fall at 38% support of recent rally. If money is a measure then FII sold in cash market from past two trading sessions in a row. Logically, real test for the support will come at 50% mark of the rally. In that way, Nifty has supports in this way, 7130-low of event day, 7100-mid-point of rally and 7080 – pre-event low. So the range of 7130 to 7080 will be real support and decisive support. In simple words, mid to long term direction will be up as long as we hold above 7080.

On higher side, Nifty has resistance at 7325. The best bullish way that market can opt is that if it correct from current levels and rebound from 50% support zone. Remember, this has happened when it rebounded from 6638 levels. At that time, 50% support was at 6640. Market is likely to take direction near upcoming union budget and its announcement.

For today’s trading support will be at 7210-7200 levels. Resistance on higher side will be at 7290 and 7325 levels. We may see initial impulses due to higher close in US market. Follow up trades may go lower. Traditionally, it seems that small investors are jumping to buy odd mid cap stocks. I saw activity in stocks like, HFCL again. I am again issuing strong word of caution as these buys will give you nothing.   

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Strategy for Nifty May future – Yesterday’s bounce from low has suggested that there was buying near support. This forces me to believe that we may see support around the corner near 7240 levels. On better side, shorting will give good deals below 7230 levels. On higher side, Nifty future will have resistance at 7350. So, this 100 points range will give me a decisive opportunity. I give a favour to bears as I am expecting a move towards 7100 before a fresh rebound.

S&P 500 (USA) – Is this bounce unexpected? Not entirely. On daily chat, it came to for a right shoulder. As long as it is below 1903, I will maintain bearish view only. Even for today’s session, we may see trades near 1892 before fall. S&P 500 knocked 50 DMA too many times in past few days. It can break it any day anytime. Risk reward ratio suggests that it may favour bears only as long as it is below 1903. We saw 1880+ on 7^th March 2014 and it’s more than 2.50 months so far that we are on same levels.