NIFTY and SENSEX Thru' 22-02-2008- EWI STU- Tom Denham

NIFTY and SENSEX Thru' 22-02-2008- EWI STU- Tom Denham

NIFTY and SENSEX Thru' 22-02-2008


[Beyond Western Europe]
Wave (3) on the monthly line chart of the [India National Nifty Index] displays 13 subwaves. The completion of 13 waves would make a top likely. In addition, price slipped below its 8-month exponential moving average in January and remains below it as of 22 February. Price gave a false bearish signal when it slipped under this long-term guide to the trend briefly in April 2005, but if wave (4) is in progress, the standard Elliott target would be a Fibonacci 38.2 percent retracement of wave (3) to 4364




The pattern of the [S&P CNX Nifty Index] suggests staying bullish until price pushes above 5545, but thereafter, the potential of another fall increases. Let me explain why. Price fell 30 percent to 4448 in one steep move. Sharp falls are often just the start of a move. In addition, the initial rebound to early February developed in three-wave form. These factors suggest that the January low was wave A and the current rebound wave B of an ongoing correction. If this view is correct, then wave C should fall to a new low sometime in the coming weeks.

Price rebounds often achieve two equal legs up and that would occur at 5900. However, any move above 5545 would satisfy minimum expectations for an ABC rebound. In addition, price may begin to encounter resistance from the top formation just above 5545.




On the other hand, the [S&P CNX Nifty Index (Singapore Exchange)] rebounded from trend channel support in May 2004, June 2006, and January 2008. On numerous occasions since 2004, price rebounded from above trend channel support. This performance is a reason to favor the upside from the January low. In addition, RSI is near historic lows, which has been a bullish condition in the past. Finally, trend continuation is a common surprise delivered by third waves, so I am reluctant to rule out the possibility of Indian stocks rallying while the trend channel remains intact.




This daily chart of the [India Sensex Index] highlights bullish potential from a near complete triangle correction. Triangles are not common in the Sensex, but it is a possibility worth considering while price is above 16,457. A fall under 16,457 would exceed the limits of a converging triangle and suggest favoring the downside instead.