12 August 2014: Nifty Elliott wave analysis: A bounce from 50 DMA is giving a possibility for a move towards 20 DMA, i.e. towards 7680 levels. Trading support = 7616 to 7593.

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

For 12 August 2014: -

On 11 August 2014, FII Sold INR 162.92 crs and DII Bought INR 234.41 crs

We got gap down on one day and next day we got gap up. These are just cannot easy to conclude as gap are wild thing. There is just one strong point that we have – gaps are usually a symbol of primary trend in the same direction. So one day it was down and next day it was up. Now, I am focusing on follow up of trades. As long as it is above 7609 I can say that it is near to the strong support area.

Now 50 DMA is at 7616 and 20 DMA is 7680. Best, trading direction on Nifty always comes when it stand above both these moving average. Trades in between 50 DMA and 20 DMA is not easier. Although I believe that it can see a move towards 20 DMA. We need to take a note that this bounce has just started from 50 DMA support so it is still early stage. If this bounce is going to sustain then we may see the conversion of another rally. One should never short index in this kind of formation.

Yesterday, we saw the meaning on hammer pattern. Yesterday’s low was also higher than Friday’s high. Another important point is that we saw a good short covering move in last 30 minutes of trade.

For today’s session, I am expecting some higher opening. It will not be easy if it comes directly at 7680. Depending on gap up one should to trade long in intraday dip as long as it is saving 7616 levels. It is not going to be as simple as I am writing. Range to watch will be 7615 to 7680 for any direction. It is favouring up and bullish move as of now.

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Strategy for Nifty August future – Nifty August Future may open positive 35-40 points as indicated by SGX Nifty. So will it be second gap up the row? If this happens then do not act in opening hour. It can be only meaningful if you buy a dip rather than these ride. My expected target can be at 7700 or higher but buy point must be reasonable.  

S&P 500 (USA) – S&P came tall with a bounce from 1910 to 1945 levels. After hitting 1945 it slipped in second half. 1945 is also a point where earlier it made a life time high and corrected. So, it is a meaningful resistance. Has it formed any fresh sign of weakness? As long as we are getting positive close we cannot say any weakness yet. From 1945 to 1935 is just a typical dip which may be bought by market.