The Value Wave

THE LONG & SHORT REPORT : by Rohit Srivastava

The writing is on the wall. 20 January 2011 www.indiacharts.com

The Long and Short report discusses my long term thoughts which follow my very detailed analysis of where we stand on the Kf cycle at http://www.indiacharts.com/vwave/KFW.htm. The Long term report discusses my thoughts on the Wave structure on the monthly and quarterly charts and what are the alternatives. The idea is to focus away from short term trading cycles on the daily and weekly degree discussed on the home page to understanding where we stand. SEPT 2010 REPORT PDF AUG 2011 REPORT PDF Prepare for another countertrend. When the countertrend rally started out in 2009 I did not expect too much action and expected it to be a retracement of the previous fall. It retraced 99%. Now again after 1 year of channeled behavior the Nifty has a positive divergence on the weekly RSI and is ready for a countertrend move. Channel breakouts are ferocious. So first while the lower end did not break as I was expecting now the upper end is at risk. A breakout would be on a close above 5320. Above that the implications would be of a 61.8% retracement of the entire fall from the 2010 high to the 2011 low giving a target of 5674. 50% would be 5447 which would also be a testing period.

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Channel breakout rallies are often vertically upwards. With few small halts despite negative divergences they can continue upwards. Two examples are below from 1996 and 1997. 1997 appears more like what we see today in fact even count wise its a good alternative to fit where an expanded flat results in a 5 wave impulse rally which is why channel breakouts are the Bubbliest. In 1997 78.6% retracement was achieved in that move. A similar retracement today would take Nifty to 5980. While I write this the weekly momentum indicators confirmed a buy with a close above the 20week average. An expanded flat would answer the problems of counting the last leg between Oct and Dec and
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allow for an impulse count for the current rally from the lows. The question whether this means a new bull market has started, will remain with investors; I cant answer that right now. A strong rally is building and will continue for sometime to come with little respite.

This alternate of an expanded flat is shown below on the current price data. This alternate allows me to stick with my B triangle structure where C=A and then followed by an expanded flat. For channels a equal to the size of channel
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projection upwards is an old way of setting a target and it comes pretty high at 6170 almost near the all time highs. This would be the best case scenario. For traders it should be a great trade and I will keep an eye each level from the first target of 5260 for risks of failure but the above evidence puts high probability of breakout of channel on upside now.

If it was not for the seasonal bearishness of January I should have been able to take this call earlier as A/D shown below reached near oversold levels and that indicates one sentiment extreme. Now that we have hit this point markets could remain bullish till at least March if not April/May. Speed and time will be two aspects to watch. Till then most
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The Value Wave

sentiment indicators will have cooled off.

The most bearish alternative to the above scenario is that the market stalls at the upper end of the channel near 52605300 and starts its next leg down. This I discussed last week in the expanded flat or complex corrective alternate.
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However stocks show the possibility of a larger degree X wave that can happen and the evidence above adds to that so let me end the note with one final alternative the least bullish one to watch. This shows wave B in formation as an expanded flat. Earlier I thought B was over at the Dec high but it failed to follow through from there. Now B as an expanded flat from the Nov low allows for a 5 wave rally to 5260-5300 near the upper channel line or weekly Bollinger band. If this is still the case we will see a top there. That will be the first level to watch our for selling pressure to emerge.

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Rohit Srivastava: ' This is a free update on the markets for public reading. My views are based on my analysis of the markets after years of such analysis, since 1991. Investment decisions made on the above analysis would be at your own risk and I take no responsibility for your decisions based on the above analysis.'
Rohit Srivastava is an employee of Sharekhan limited, you may note that Sharekhan limited and/or its subsidiaries /group companies are not connected with this website in any capacity.

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