29 May 2014: Nifty Elliott wave analysis: Derivative expiry is coming on decisive day on chart. Break below 7300 will give us 7260 levels. Metal stocks may be on higher side of activity and mid cap + small cap on litmus test.

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

For 29 May 2014: -

On 28 May 2014, FII Sold INR 286.54 crs and DII Sold INR 33.40 crs

We saw another dull day in the last trading session. We have derivative expiry today. Current pattern on daily to hourly charts are not very encouraging for bulls. Nifty has first support at 7300 but the break of 7300 will give us levels near 7260. You can see that conclude is almost same as yesterday.

According to Elliott wave theory on hourly chart, Nifty is in trending wave ‘C’ which is a part of corrective full wave. So we are in wave ‘C’ from 7504 and we have already travelled a distance of nearly 200 points. Logically end point of wave ‘A’ need to be broken. End point of wave ‘A’ is at 7130. This is prime reason that I try to be reserve from buying on rise although stock specific moves are coming to catch for good.

I still like to issue warning from buying mid cap and small cap stocks as those are just forming trap. We have derivative expiry today and it will be interesting to see the moves on some stock which moved rapidly over past few trading sessions. If this is going to be even short term top then also it can hurt investors very badly.

For today’s trading technical support will be at 7300 and then at 7260 levels. If it stays 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.

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Strategy for Nifty June future – It has key support at 7300 levels which is still 50 points away. On higher side, Nifty June future will face resistance at 7360-7380 levels. I will be comfortable in shorting below 7280. Till that time, it will be speculative short call on rise. Note that we have derivative expiry today hence be cautious. We may see some trimming premium on future value of stocks and indices.

S&P 500 (USA) – A day after a new all-time high was not so encouraging. It spends the day on dull note but closed lower. I still believe that this top should not be bought. We are in last two days of May month. This is going to decide the fate of US market for June month. Chances are very high that we will see something going in favour of bears by tonight or tomorrow night. I want to see the break of 1900 first.