Saturday, January 9, 2010

NSEIT: A Top in Place or just a little bit more before the tumble..

NSE IT: has had a stellar rally from the bottom made in Mar 2009 to current 5923. Since the rally has been parallel the structure has been a corrective type rather than an implusive one. The index has made a top in y2K rally, so i am considering all charts as a corrective pattern rather than impulsive one.

Wave Strucuture: The Index is in WXYXZ, where we are in process of making a Final Z Top, thus making IT index ready for a PLUNGE. Max i think on the upside we may as well see 6100 to 6200 zone, however that would occur, where the Index decides to make an Ending Daigonal for Wave Z. Currently, the wave Z seems to be a ZigZag formation ending with Three Black Soldiers.

Daily Chart Wave Count Comment:
Ideally, a top would be good with Infy results coming out makin it a Blow-Off top wave "e", been a proper Ending Daigonal for wave "Z" Top. This is a typical Triple Combination with:

(1) W been a Zig Zag,

(2) wave Y exhaustion  with another double combination,
   1) with Wave "w" zigzag,
   2) "x" small triangle,
   3) wave "y" been a triangle "abcde". As we know about triangles, "triangles generally appear in wave prior to last actionary wave. As such, it has occured in wave "y" of wave Y.

Now, we are in last leg of upside move for this Index (all IT shares). Currently, the rising X'-b line has been breaches; and on daily charts we see a "Three Black Soldiers" formation. This is proper bearish structure and can suggests a top in place. Plus, on weekly charts, the Insehas made an "Evening Star" candle pattern with surging Volumes.

The Fall from Jan 2008 Wave Count on IT Index:

The rise from Mart 2009 Lows Detailed wave Count:

Weekly Chart: If we look at Weekly chart, there is a Double Top structure, based on which one can be short on Index with Stop Loss of 6000 and target of 3900 (~50% of height from Mar 09 Low of 1992 to Jan 2010 high of 5923). The weekly charts suggest a medium term top in place.

Swing Commentary: Based on Swing Break status (employed by the Turtle Traders and promoted in india by KPL of I have analyzed the weekly swing status of NSEIT and observed that the rally was so strong that the lowest low the stock ever maintained was 3 weeks. Meaning since the uptrend has started, the Index has not even fallen to breach the lowest low made in preceding low.
"3 Week Swing Status": The Rally in NSEIT has been so strong, that on weekly charts, the stock had given a Three Week Swing Buy on week ended 20th Mar 2009 at close of 2229.35 from where it has rallied to 5923. As of now, it has not given a sell on 3-Week Swing Basis, which stands at this week's low of 5599.30.

"2 Week Swing Status": Based on two weeks swing, the Index has given a Sell signal. Previously, the stock. Check Chart 3 for Swing Break on Weekly basis.

Future scenarios:
I would not be surprised if there is a short term bounce in place. As of now, if we donot bounce back, I think we have a top that can take the IT Index to at least 4200 mark. Under a bullish scenario, a one more blow off peak cannot be ruled out, targetting 6100 zone. however, i reckon the index has lost steam, and that will only be wave "e" of final "Z" Top.

Verdict: Short with SL of 6000. The stop loss is around 400 points up. So be careful there could be an bounce day and adequately position yourself. On the upside i think 6000 to 6200 is max zone.

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