The Nifty has gained 80.60 points or 1.93% and closed at 4252. I had mentioned in the last week’s review that
“in the absence of a confirmation, we have to maintain our current trend i.e. bearishness in daily charts.” … “But it appears that bulls have lost momentum now and could not decisively push the market up. We may anticipate further downtrend next week.”
On Monday the index lost 24 points. However, the bulls pushed the index up the very next day. Three outside up pattern was formed on Wednesday. During an uptrend this doesn’t have much significance. On Friday the index had once again closed in red, losing 15 points. So, two days belonged to bears and three to the bulls. I had also written that:
“Since neither the bulls nor the bears have won the battle at the end of the week, let us maintain our view on the index: the short term trend is bearish and the medium trend is bullish”.
Let us analyze the daily chart of the Nifty using Elliot wave theory.
We can see impulse waves 1, 3 and 5 as well as corrective waves 2 and 4 on the chart. When Elliot wave theory is applied to the chart, it can be concluded that corrective decline ‘a’ has apparently ended. Wave ‘b’ is in progress. A dark cloud cover pattern has been formed in daily charts. On 25/06/07, if a red candle and lower close are formed it would confirm that this wave has ended and the another corrective wave c is likely to start. So from short term perspective, Monday’s session appears crucial.
Interestingly, in daily charts, the higher highs and higher lows are still maintained. This means that market is still bullish, though a corrective decline is inevitable. If we consider the fibonacci retracements, the index, though managed to close below 61.8%, has bounced back strongly.
As I have mentioned in India Street Analyst – India Stock Upgrades and Downgrades – Part 1 38.2% and 61.8% are extremely important. Since the nifty has held the 61.8% levels, we can hope that index could move up further; we will still wait for a confirmation on Monday.
The weekly chart does not have any special significance this time, except that a ‘bullish’ harami candlestick pattern has been formed. In Japanese, ‘harami’ means pregnant and they consider the harami pattern as a confusing signal.
When we ‘blend’ the two previous red candles since their bodies overlap, we get the blended candle whose highs and lows correspond to the high of the first candle and low of the second candle respectively. This is followed by a green candle. This kind of pattern during an uptrend, at the most, could only be a support. In a down trend, this may be of some importance if followed by a higher close and green candle or the ‘three inside up’ pattern.
Candlestick patterns are very useful as potential reversal signals. Once a candlestick pattern is formed and confirmed, the reversal pattern is a valid signal. There could be some upside due to technical reasons such as oversold conditions in hourly or daily charts. But overall trend will remain intact.
ACC continues to remain very bearish in both daily and weekly charts. So are Bajaj Auto and Infosys. Reliance Communications, Reliance Energy and Siemens are bullish in both daily and weekly charts.
The following table gives the top 5 gainers and top 5 losers among index stocks:
| Scrip | % Gain | Scrip | % Loss |
| Reliance Energy | 10.79 | Ranbaxy | 4.83 |
| State Bank of India | 9.90 | Satyam Computer | 4.14 |
| Larsen & Toubro | 8.20 | Glaxo | 4.07 |
| Tata Power | 7.83 | TCS | 3.75 |
| Sterlite Industries | 7.46 | Infosys | 2.92 |
The following table gives the top 5 gainers and top 5 losers in overall market:
Scrip | % Gain | Scrip | % Loss |
| Vakrangee Software | 35.70 | Netflier Finco | 23.59 |
| Entegra | 35.29 | Nagreeka Exports | 22.95 |
| Malu Paper Mills | 33.02 | Aarti Drugs | 18.46 |
| Jayant Agro Organics | 32.86 | Glory Polyfilms | 17.79 |
| Melstar Information Tech | 32.35 | BLB | 16.83 |
One may wonder how stocks gain or lose so much in a week. Read my earlier article. Vakrangee Software, is a case of bear trap. Investors should always follow the normal market and try to forget why some stocks are going up quickly and others fall down so much. We cannot expect a bear trap or bull trap every time a stock breaks its support or resistance; nor we can expect such traps in every stock.
We have been tracking some stocks in our earlier technical reviews for medium term.
| Scrip | Current Price | Trend |
| Ind Swift Laboratories | 56.70 | Still not closed above 63.40 |
| Omax Auto | 82.25 | Not broken resistance 94.70 |
| India Bulls real estate | 408.95 | Very near its resistance at 420 |
| Jindal Photo | 108.30 | 122.30 on weekly close not achieved |
| Pochiraju Industries | 25.40 | Touched a high of 28.50 from a close of 23.50; continues to form higher lows; next resistance is at 31.95 |
| Punjab Tractors | 296.50 | Though the stock has lost about 8% so far, still supports are intact; a doji has been formed in daily chart. Doji indicates indecision; prices can go either way. |
| Apar Industries | 167.35 | “Falling window” successfully closed. |
| Bharat Earth Movers | 1192 | Stock has gained 68 rupees or about 6.04% during the week. |
| Lakshmi Vilas Bank | 78.50 | It broke resistance at 83.70 and touched 84.40; but didn’t close above 83.70 |
| Aztec Software | 86.85 | Stock lost 4.30% but very oversold in weekly charts; Breakout direction awaited. |
Status of stocks covered in analyst upgrades and downgrades:
| Scrip | Current Price | Trend |
| Development Credit Bank | 100.70 | Stock gained 9.40% during the week |
| Sical Logistics | 294.20 | Stock gained 4.07% during the week |
| PSL | 289.80 | Stock gained 12.87% during the week |
| ACC | 852.25 | Though stock gained 3.60% it is still bearish |
| Bombay Dyeing | 554 | Though stock gained 2.41% it is still bearish |
| Cipla | 209.85 | Unchanged from last week’s close |
| Cambridge | 126.45 | Stock down 1.71% during the week |
| Engineers India | 493.20 | Stock gained 2.93%; breakout on either side anticipated |
| Tamil Nadu Petro | 17.45 | Stock lost 1.97% during the week |