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B. Krishnakumar

Nifty (1590.35)

Preferred View: Analysis based on Gann methodology points to a bearish trend till the last week of September. As observed in earlier weeks, the index is likely to test the earlier low at 1292. This view would be valid as long as the Nifty trades below 1658.9. A breach of this level would warrant a review of the prospective trend reversal level, date and the time for this to be completed.

Gann explored

A study of the historical price behaviour of the Nifty highlights the usefulness of W.D.Gann's methodology in identifying inflexion points in date and time. As observed last week, Gann placed importance on the concept called "squaring of time with price". He emphasised on the fact that a change in trend is most likely when price and time are squared.

According to Gann, price and time can square in several ways. They would be at square if the latest price or time consumed has a geometrical or mathematical relationship with either the earlier price range or a significant high/low recorded earlier. Based on these factors, we arrived at the likely turn dates for the Nifty.

Why September 17-24: As observed last week, the high of 1658.9, recorded on August 11 turned out to be a key date in identifying the next trend reversal. The index has declined to close at 1590.35 on Friday.

The key question of "when is the next turn in trend likely" was left unanswered last week. An analysis suggests that a change in trend may happen in the time window between September 17-24.

As mentioned last week, the rally from the low of 920 in April 2003 to a high of 2014.6 lasted for 256 calendar days. Projecting 256 days forward from the high of 2014.6, the turn date is September 21.

From the low of 1292.2 recorded on May 17, 2004, the likely turn date falls on September 23 when time would have squared with the low. Interestingly, the time taken to record this low had the Gann's mathematical relationship of one-tenth of the low of 1292.2.

The time would square with the high of 2014.65 at 252 days from January 9, which would be September 17. We now have a confluence of prospective square of price with time happening in the period between September 17 to September 23.

In terms of price, the price range of 1165-1180, 1210 to 1220 and 1400-1420 are key target zones based on Gann study. A change in trend is most likely in the week ending September 24, if the Nifty trades in any of the price range mentioned above.

Sensex (5064.6)

A bearish trend prevailed last week. Concerns over spiralling oil prices and rising inflation rate weighed on sentiment during the week. The near-term outlook remains weak. A drop below the upward sloping trend line connecting the lows recorded at 4613.94 and 4723.04 would confirm the bearish outlook. A drop below 5045 would result in the breach of this trend line and would push the index closer to the earlier pivot low, which was at 4227.5. The bearish view would be valid as long as the index trades below the key resistance level of 5270.

S&P CNX IT (2294.3)

Information technology sector stocks managed to rule firm despite the overall weak trend witnessed last week. The firm trend in stocks such as Infosys, Satyam and Wipro played a key role in imparting strength to the CNX IT Index. The near-term outlook appears bullish. The index is likely to move to the target zone of 2360-2370. Investors holding long positions may have a stop loss at 2220. A drop below 2220 would lead to weakness and negate the positive outlook.

(The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop loss level is breached. There is a risk of loss in trading)

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