Nifty EOD 15.3.2012

So I hope today's downmove would not have caught any of my friends here off-guard and BELIEVERS would infact have made good use of it.
I wish to discuss in detail one striking aspect of market dynamics which was on display today.
Although it was mentioned during the trading hours as well but I wish to re-iterate that particular point to drive home the lesson that market very often reaches a point from where it can take any direction depending upon the news that is expected at that point in time.
At 10.35 AM I wrote:
Q
10.35 AM

Now,5470.1 is an important threshold.
Remaining below it and going below 5427.9 would confrim that this 3 wave form is getting transformed into a 5 wave form
So two important threshold points:
5427.9 to confirm that top has indeed been formed at 5498
5470.05 breached would mean another test of 5500

UnQ
Any positive news would have triggered an upmove by 100 odd points as an Impulse and our patterns were ready for it.But the negative news transformed the 3 wave form into a 5 wave one as the day progressed.
In this manner, the EW enthusiasts have to locate the thresholds within the pattern and plan/initiate/protect their trades.


Where do we stand now?

Now based upon the above chart if one buys OTM options then I would not call it very prudent. Why? Because there is many a slip between the cup & the lip.
The above chart can also be labelled as:

Thus net-net we have following common points in two probabilities:
1. Both of these point to down move;
2.Both of these show 5200 as minimum target.
Difference is in their forms:
while first Probability has the downmove as C a 5 wave form;
the second one has the downmove as B(b) a 3 wave form and this 3 wave form may be a complex one as well.
Being a Conservative,I would advise you not to go out and buy 5200PEs.Rather sell 5500CEs or buy In the Money PEs


Raghu