27 May 2014: Nifty Elliott wave analysis: 7563.50 and 7504 will act as double top with second top lower. Key support will be only at 7130 which are still more than 200 points away. Massive volatility is expected till expiry day and it may be landslide dip.

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

For 27 May 2014: -

On 26 May 2014, FII Sold INR 84.13 crs and DII Sold INR 208.39 crs

I have quoted this yesterday itself during market hours before fall begun, “Small cap and mid cap indices are under performing NIFTY. It may be a signal for double top on daily chart with second top coming lower. I can conclude above if we see closing goes without fresh intraday high. OR - more over- a weak hourly close.” Based on this we took short on Nifty Future from 7490 levels itself which gave a quicker than expect fall of 200 big points.

According to Elliott wave theory, I have already said that we are in progression of wave ‘B’ and a top is about to come. Note that we are dealing on hourly chart right now. We got end point of corrective ‘B’ wave at 7504. This is excellent top as it has words of confirmation of double top.

Above is not the only event for yesterday. By close, Nifty closed with small negative but small cap index slipped by 3% and mid cap index slipped by 2%. I have already warned from buying stocks of such indices. I gave an example – HFCL- which was on 10% up circuit yesterday finally closed in red at 12.70 but low was 11.60. Where were circuit? It was at 14. Just count in percentage term and feel the heat. Do not burn your money in this kind of stock. If you are burning then no one can help you.

For today’s trading technical support will be at 7325 and then at 7290 levels. If it starts trading below 7325 then we can expect the re-test of yesterday’s low near 7260. On higher side, it will face resistance at 7400+ levels. I just believe on thing – sell the rise and sell the weakness. We may get both today as yesterday.

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Strategy for Nifty May future – I was shocked with yesterday’s sell off but I was expecting this. Only thing is that it came little sooner. Technical charts are suggesting that if it starts trading below 7310 then we can expect 7260 levels. I can warn that charts may issue a signal for the move towards 7100 near expiry days. Note that we are just two trading sessions away from derivative expiry.

S&P 500 (USA) – It is again back to 1900 levels. This is little uneasy right now but giving all possible sign of top formation. Still I suggest that one should stop out above 1903 and prefer to wait for weakness. We cannot expect any good extension above 1903 even after bullish mode. Based on chart, being bullish is also not making sense even after new all-time high. From past many months, S&P formed new all-time high but fail to give unidirectional move. Be on side line and wait for opportunity to short.