Weekly Nifty Indian Stock Exchange Analysis

Feb 22, 2009: 5:41 PM CST

Per reader requests, I’m going to analyze the “Nifty” (India’s Large-Cap Stock Index) for structure and possible price clues.  I did this last week with the “Elliott Count on India’s Nifty” and will be looking this week at the Daily Price consolidation and highlighting other sources of information.

As a disclaimer, I’m not an expert on India’s Stock Market, but am applying technical analysis of price trends to highlight structure and opportunities.

India’s Nifty Daily $CNXN Chart:

Before getting too deep, let me explain that I’ve tried to do something hopefully interesting – I’ve overlaid two possible Elliott Wave Counts on the same chart to show how the current structure can be interpreted one of two ways.

Under both scenarios, let us assume wave (3) ended with the October lows.

First, let’s assume all the price action from November until present has been part of a larger Wave 4 Triangle Correction, which is noted with the capital Black Letters (ABCDE).  If this is the case, then Wave 4 ended just shy of 3,000 and we are perhaps beginning Wave 5 to the downside but are currently testing support at the rising trendline that extends back to November 2008.

Second, let us assume that Wave 4 has already ended in early January 2009 where I have capital C labeled.  Under this count, the letters are in lower-case and are colored blue, and the difference is that the triangle “D” is actually wave 1 down with the E wave being corrective Wave 2 up into resistance.  If this is the case, then we are perhaps beginning Wave iii of 5 down – provided we break the triangle to the downside next week.

Both counts assume that price will break the October 2008 lows, and both counts would be officially invalidated with a break and close above 3,200 (which would break two prior swing highs and eject price out of the triangle to the upside.

Putting a discussion of Elliott aside, classic technical analysis states that we’re in a triangle consolidation and that price will move strongly outside the triangle – in either direction (but most likely the downside) once price cleanly breaks above 3,000 or below 2,700, which would be the current (estimated) extremes of the triangle move that has been occurring since November 2008.

The Momentum Oscillator is also showing this triangle consolidation and it is giving us no clues.  Look for a breakout to be confirmed both in price and the oscillator (both breaking the same trendline at the same time).

This would suggest not to take a position until a break occurs, and to wait until price breaks one way or the other before trying to trade in this consolidation environment.  I suspect we’ll get a resolution one way or the other this upcoming week, because the coil can’t be wound too much tighter before price expands out of consolidation.

For additional analysis, there are good blogs/sites dedicated specifically to analyzing the Nifty Index or India’s stocks, such as the following:

Indian Retail Investor (who also analyzes gold & stocks)
Indian Stock Markets (which focuses on short-term daily updates)
The Nifty Doctor (who publishes daily takes on the Nifty)
Stock Maniacs (focused on the Nifty including key daily support & resistance pivot levels)
Market Calls (who writes various quick updates on the Nifty)
Technicals for Dow Jones and Nifty (who publishes at-a-glance updates)
Bramesh Technical Analysis (who also discusses other markets as well)
Tryin2Trade (has good analysis on the Nifty as well)

I just surveyed a quick glance of Nifty-related websites so feel free to let me know if I missed a good resource.

Corey Rosenbloom
Afraid to Trade.com

76 Comments

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