Aug 15, 2015

Weekly Technical Report

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Nifty

Perspective

Support

Resistance

Volatile

8320 - 8195

8622 - 8655

8518.55

200 Day EMA

8285

Weekly Pick
-----------

Have the bulls got back into groove?

As long as Nifty stays below 8655, the answer is NO.
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Observations:

[Earlier Indications are in Italics]

Weeks action formed a hanging man sort of candle pattern at the resistance zone which is bearish reversal candle
formation (especially on a weekly chart).
The expected bearish storm came from China as a result of which Nifty lost 243 points in three days which is the 2nd sharp
decline after we called the top at 8655 in weekly technical report dated on July 25, 2015. Increasing volatility may delay
the downside target but the bearish setup remains intact until Nifty stays below 8655. In simple words traders can avoid
creating aggressive long positions and investment positions as long as Nifty stays below 8655. Also it not means dont
buy anything in the market, Suggestion is selective buys can be executed with strict stoploss. [Overall index could begin
the falling leg in a day or two and this could be wave iii which is expected to be very dynamic & our initial target is
8,000 mark before August expiry].
The level of 8655 is still acting as a lower top as we stated earlier and so far things are in line with our expectations
without any damage in the bearish setup.
Index has started the falling leg - the major wave iii which is expected to be very dynamic both in price and time see the
other technical evidences in following pages.
The short to medium term trend remains down as long as index stays below 8655.
Our initial target is remains same i.e. 8,000 mark.
As per our preferred wave count: Index has completed a five wave decline from the high of 9119 to 7940 which is marked
as major wave i as a leading diagonal (see exhibit 1 on page 6). The three wave upward rise from 7940 to 8655 is marked
as major wave ii. there are couple of alternates are available in the internals of major wave ii the exact labels will be
marked once index moves below 8320.
This view (Wave count) would come under threat if Nifty closes above 8655 mark which means the bearish expectation
would cancel out if Nifty closes above 8655 levels.
Cycle degree wave count is as follows: The high of 9119 is some larger degree wave end. As per our preferred count Cycle
degree wave iii/C has ended at 238.2% projection level of wave i/A & wave ii/B. The cycle degree wave i/A started
from 4531 level and ended at 6229 and wave ii/B started from 6229 and ended at 5118. The dynamic wave iii/C
started from 5118 and ended at 9119 with a couple of extensions. And now index is in progress of cycle degree wave
iv/X down. We have marked 9119 as cycle degree top in Mar 2015 when index was around 8850.
Major Head & shoulder pattern has been witnessed in Nifty which is a classic top reversal pattern. (See page 3)

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S&P CNX Nifty Daily

Observations:
The fall from 8621 to 8337 has formed a Three black crows candle pattern which is an initial bearish development as per
Japanese candle sticks (see exhibit No 2 on page 6). This pattern would be nullified if the Nifty moves above 8,622.
Apart from this we observe a smaller degree head & shoulder pattern on daily chart also which could add strength to the
bears once index breaches below 8320 i.e. neckline of the pattern.

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S&P CNX Nifty H&S Pattern

Observations:
We note a larger degree head & shoulder pattern on weekly chart which is a classical top reversal pattern (see exhibit No 3
on page 6).
The Chaikin Money Flow (CMF) oscillator is clearly shows the inflow of cash in the head and shoulders.
Left shoulder has +0.27 CMF and head has +0.24 then the right shoulder went in negative which indicates drastic decline in
money flow.
Make note when market was trading around 7950 we had maintained strong bullish note for the target of 8650 8700
expecting formation of this right shoulder development. We have not considered the fall from 8490 to 7940 as a right
shoulder because the degree of the shoulder is not matching completely.

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S&P CNX Nifty & BSE Mid Cap Index - Intermarket divergences

Observations:
The above chart shows the intermaket divergences between Nifty & Mid cap index in all important tops and bottoms.
In April 2015, Midcap index made a higher top, but Nifty made a lower top (which is an inter-market divergence), followed
by a sharp fall of 847 points in Nifty. In August 2015 again the Midcap index formed a higher top in the larger degree,
while the Nifty has so far made a lower top. Will this inter-market divergence led to a similar fall in Nifty in the coming
weeks?

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Exhibit - 1

Exhibit -2

Chart on left is rising leading diagonal; on left is falling diagonal relevant

to Nifty currently.
Source & Ref.:
Elliott wave principle - key to market behavior
By Frost and Prechter Page No- 40
Exhibit - 3

Source & Ref.:

Profiting with Japanese candlestick charts
By Steve Nison

Ref.:
Technical Analysis Explained
By Pring, Martin Page No - 76 to 83
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Technical Research Analyst: Gajendra Prabu (gajendra.prabu@hdfcsec.com)

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HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East),
Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com
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