Technical Analysis

Sensex — After posting a triple bottom at around 12,316 (around 16 March 2007) the index rallied towards an all-time high at 14,723. After its recent low, the index is in a confirmed uptrend exhibiting a sequence of higher highs and higher lows (higher tops and higher bottoms).

Wave Count: SENSEX — Taking price extreme at 12,316 (16 March 2007), the index completed Wave (1) at 14576 (30 May 07). Wave (2) corrected the advance in Wave (1) towards 13,946 (low of 12 June 07). Currently we are into Wave (3) of the advance, which has a minimum price target of 16,206 (taking Wave (1) = Wave (3) in “Price Movement”. Wave (3) target of 16206 is derived as 2,260+ 13,946.The levels of 2,260 is derived as the distance between start of Wave (1) at 12,316 and end of Wave (1) at 14,576: [i.e. 14,576-12,316=2,260].The level of 13,946 is the assumed end of corrective Wave (2).

Wave Count: NIFTY — Taking price extreme at 3,574 (16 March 2007), the Nifty completed Wave (1) at 4,291 (23 May 2007). Wave (2) corrected the advance in Wave (1) towards 4,103 (13 June 2007). Currently we are in Wave (3) of the advance which has a minimum price target of 4,820 (Taking Wave (1) = Wave (3) in “Price Movement”. Wave (3) target of 4,820 is derived as 717+4,103. The level of 717 is derived as the distance between start of Wave (1) at 3,574 and the end of Wave (1) at 4,291: [i.e. 4,291-3,574]. The level of 4,103 is the assumed end of corrective Wave (2).

Moving Averages: SENSEX — The index is trading above the 50dma at 14,261 and 200dma at 13,547.The 10wma is at 14,317. The index has support around the 14,317-14,261 band. A weekly close below the 14,261 could see the index enter a short-term consolidation with decline towards 13,946 (low of 12 June 07).

Moving Averages: NIFTY — The index is trading above the 50dma at 4,205 and 200dma at 3,938.The 10wma is at 4,220.The index has support around 4,220- 4,205 band. A weekly close below the 4,205 level could see the index enter a short-term consolidation with decline towards 4,103 (low of 13 June 07).

Conclusion — Stay focused on upside towards (SENSEX – 16,206; NIFTY 4,820) in 3-6 months while price holds above (SENSEX – 14261; NIFTY – 4205) on a weekly closing basis.