09 October 2014: Nifty Elliott wave analysis: Will gap up boosted by rise in US market sustain? Charts has generated pause at 7840 but yet to shown strength before recovery begins. Stiff resistance = 7909, 50 DMA !!!

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For 09 October 2014: -

On 08 October 2014, FII Sold INR 1440.99 crs and DII Bought INR 663.09 crs

Indian market did not reacted much at support of 7840. It has closed at 7842 with a low at 7815 levels. Now, key is that we saw massive rebound on US market which is capable of giving gap up. This gap up can be here and there near yesterday’s high of 7870 levels. If it feels gap up then it can be again bearish but it makes one thing clear that yesterday’s closing is very important.

I repeat unless it breaks the range of 7840 to 7815, do not add any fresh short trades. I am not very bullish at support but I am cautious from shorting too. Take a note that 50 DMA is now at 7909 levels. As long as Nifty is below 7909, we cannot define bullish wave formation. We saw significant drop in volume in recent dip. It can be bottom formation effect or it can be festival effect too. Market needs to decide but generally trading volume remains low in this season every year.  100 DMA support is at 7705.

For today’s trading session, we may see opening near 7880 levels. After that, we have only meaningful resistance at 50 DMA, which is at 7909 levels. I like to see how market is going to react after gap up. If it gets follow up on higher side then 7909 may be in reach.

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Strategy for Nifty October future – As indicated by SGX Nifty, it may open at 7930 levels which is higher than yesterday’s high. If it sustain above 7930-7940 then we can expect higher levels of 7970-7980 too. So far, Indian market has not shown that kind of steam for recovery after recent top. Do not expect one sided weakness unless it breaks 7890.

S&P 500 (USA) – I quoted yesterday, “One should expect a move towards 1925 levels sooner by the end of the week”. It has not waited for the end of the week. It hit 1925 and then it finished the day in least expected way. It took a bounce to close at 1968. This is massive bounce. This kind of bounce may have sufficient energy to change mood but I will look for follow up of trade. So far, it can face resistance at 1975 to 1980. It has generated a meaningful support at 1925 levels. I will short on weakness again. Weak signal will be if it misses at 1975-1980 levels.