NIFTY TECHNICAL OUTLOOK FOR WEEK 4

The markets moved up a whopping 3.8 % last week and overall just during the month of January Nifty has gained more than 9%. We had initially anticipated a move upto 4894 but a move so strong upto 5066 was frankly very unexpected. The target blended very quickly with all the incoming positive news and inflow of more than a Billion Dollars into the economy. The markets even disregarded the S&P Downgrade of France and the other nations.

                               The Golden Ratio of 61.8%

Retracement levels from high of 5400 to 4531 is shown in the above chart. 61.8% retracement comes in at 5067. The markets on Friday made a high of 5064.          

                                    Corrective or Impulsive wave ?

A typical wave 3 is a normal wave if it retraces upto 161.8 % levels of wave 1 which is 5020. The wave 4 retraces upto 23.6% and 38.2% of wave 3 so watch the markets very carefully at these levels and one shall know if we're headed back down or up. A close below 4827 shall confirm that this is rather a corrective wave and not an impulsive wave.
The  NIFTY volumes show that Fibo traders jumped into action at the levels and healthy shorts have been created with a SL of 5100  (7th December high of 5099 shall now act as a decent resistance for the bulls)

Note : The gaps that have been created and formed shall fill pretty quickly once the markets start reacting to the downfall.

Clearly the markets have been overbought for sometime now. Stochastic and RSI  both indicate levels of caution but MACD continues to remain in a bullish crossover.

Weekly charts suggest NIFTY now has support at 4827.
Monthly charts suggest that last months high of 5099 now acts as resistance.