11 June 2014: Nifty Elliott wave analysis: Nifty formed ‘Hanging man pattern’ on daily chart. I still say, we are in the process of short term top formation. Key support will be at 7560, break will confirm the reversal.

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

For 11 June 2014: -

On 10 June 2014, FII Bought INR 682.26 crs and DII Sold INR 1215.47 crs

Let us keep all news at one side and focus on charting formation. It is hanging man pattern on daily chart which is a bearish formation. I have already said yesterday that Elliott wave is suggesting for a top formation in the range of 7680 > 7700 > 7720. We saw a top at 7683 and a drop. After that we saw intraday bounce but that failed to level with opening quotes.

I consider that 7570-7560 zone will play a decisive role for trend reversal. What I mean to say is that only if we close below 7560 then only we can say that trend is reversing for next wave. Equally, it does not mean for end of rally as long term trend remains intact and Nifty has potential to hit 8000 levels.

So far, what I see is that Nifty can come in the range of 7400 to 7300 and then only a next up move will start near budget session. Well, one need to remember that next wave of rally will depend on budget take. Will market men like or dislike. Too much of optimism is always bad. Monsoon is bigger threat for newly formed current government. Let me explain you how. Take a simple calculation – 1% deficit in rain drop will cost 0.35% deficit in GDP. So, just calculate if we get over all 7% deficit in rain fall. Do not worry, blue channel will not tell you this truth.

For today’s trading technical support will be at 7640 and then at 7560 levels. Remember, a reversal point for this rally will be at 7560. It should come in a day or two. First sign of this kind of profit taking will be if small cap and mid cap indices shows relative weakness than Nifty. Rise will face resistance at 7680 < 7700 < 7720 levels.

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Strategy for Nifty June future – Nifty June future may open near 7670 levels as suggested by SGX Nifty. Technical charts are suggesting for support at 7630 levels after opening. I will not prefer buy at top. Take a note that 7690 is level to watch on higher side. Yesterday, it has failed twice. If it crosses 7690 then we can see further addition of 30-40 points in this rise. It will not be useful to short unless it breaks 7630. My study remains same as of yesterday. Let us see if we get the magic of hanging man pattern.

S&P 500 (USA) – Most of conclusion remains same. S&P closed just above 1950 levels. It does not matter even if we are at life time high levels which are usually bullish sign. Technical charts are saying for support at 1930 as of now. I am just waiting for some strong sign for summer sell off which is bound to come. Below 1930 will be my first sign for short. Short only if desired signal comes. What we need? Just one big red day this looks sooner to come. Remember, fall can be more rapid than rise