Friday, July 25, 2014

Why this rally is different? Nifty and sectors relative comparison

Bottom Line: Nifty managed to close above the previous high level of 7808. Trend continues to be positive over short term.

The below is the research published in daily research report "The Financial Waves short term update" By Waves Strategy Advisors. For subscription to this daily newsletter visit www.wavesstrategy.com 

Relative comparison chart (1 month)


Nifty daily chart:
Nifty 60 mins chart:     
Wave Analysis:

In previous update we mentioned that “In short, as long as 7690 – 7680 level is protected on downside the trend will be positive. Only a close below these levels will indicate downside correction is probably starting. If a strong participation is seen from Smallcap and Midcap sectors as Nifty crosses 7810 we will come out with upside projections.”

Nifty continued to move higher and closed at life time high levels near 7830. The trend has been positive all the while for 8 days now and not a single time prices have closed below the previous day low. On downside one can now use 7750 as important level which is the low of 23rd July. As long as this level will be intact the trend will remain positive.

Why the current rally is different so far compared to the previous trend?

Yesterday participation was seen from Metals, PSU Banks, IT and FMCG space. Even though these sectors have been positive, high beta Midcap and Smallcap sectors continued to trade in sideways direction for 4 days in a row. To understand the participation over past 1 month we have compared Nifty with various other sectors from 25th June onwards.

So far post 25th June the first chart clearly shows that Pharma and IT are the only 2 sectors trading above Nifty and indicating outperformance from them. Pharma gained nearly 10% and IT nearly 8.5% post 25th June. On contrary, Midcap has been struggling to take out its previous high of 8th July when Nifty touched 7808 for 1st time. Each of the sectors – Midcap, Infra, Energy and PSU banks that were the major gainers and driving the rally before has failed to move above their respective highs. These all sectors have been laggards and defensive sectors have given strong returns.

A healthy sign would be considered when we see participation from broader market but this time market dynamics have changed. The current up move even though is similar to that of February – March 2014 (up move retraced previous down leg slowly) it differs strongly in terms of sectors that are outperforming.

This type of movement conforms to our current Elliott wave counts that the up move is wave b and should lack momentum. It is only when we see strong participation from the above sectors that are underperforming the upside steam should pickup.

Short term wave counts: As shown on Nifty 60 mins chart, the short term trend is positive. Even though the channel angle has been shifting and reducing, break of channel will not carry much importance unless there is sharp reversal below important support levels now near 7750 followed by 7690. Prices are now in 3rd standard correction in the form of a-b-c. Faster retracement below 7690 will confirm the entire up move from 7422 is complete but as long as these levels are intact it is better to trade in direction of uptrend.

In short, Nifty has closed in unchartered territory and trend continues to be positive. The sectors that are outperforming are IT and Pharma over past 1 month and unless other sectors mentioned above start showing momentum the overall health of rally will remain skeptical. Nevertheless, use 7750 as immediate support and as long as 7690 is intact trend will remain positive for now!

TO know more about stocks and Nifty and future path along with detailed technical analysis and Elliott wave counts subscribe the daily research report "The Financial Waves" that covers Nifty, Bank Nifty, Midcap indices, stocks, etc. For subscription options visit http://www.wavesstrategy.com/index.php/store.html



Thursday, July 24, 2014

Elliott wave theory combination with Hurst Time cycles!

In the 1930, Ralph Nelson Elliott invented a theory that suggested that prices move in patterns that are recurring in nature and one can forecast while applying certain rules and guidelines.
Elliott wave principle categorizes price action in two category:
Impulsive wave - This type of wave moves in the direction of major trend and these waves move in 1-2-3-4-5 structure. In this 1-3-5 wave moves in the direction of the bigger trend whereas 2 and 4 corrects 1 and 3 in opposite direction respectively.
Corrective wave – 80% of the times markets moves in corrective waves. There are different types of corrective patterns like Flat, Zigzag, Triangles.
Nifty daily chart: Applied Hurst Time cycles and trendlines as per cycles
As the market dynamics change one need to be very much open to accept the change and should learn new techniques and objective ways to gauge the market trend to stay ahead of the crowd.
The above chart will make little sense as of now. But trust me once you understand the logic behind how to apply Hurst Time cycles which is based on cluster of cycles applied together it will give lot of vital information with respect to time and the strength of trend. Applying Time is very dynamic but it increases the probability and prediction ability. Also understand when trading markets it is always about probability and not certainty. Knowing when not to trade is also the key to trading success!
Importance of Advanced Concepts-
Basic Elliott wave theory has little touched upon the concept of time. However, Neo wave takes a step ahead and adds the Time element to it.  We are taking one more step forward and applying an independent Time concept to forecast markets and then combining it with Neo wave. This increases the probability of success drastically and if you are a derivative – Futures or Options trader this can be one of the best combination tool from trading perspective. While trading it is imperative to get Price and Time both type of confirmation. Time Cycles is one of the most advanced parts of technical analysis which helps to time our trade! Along with Elliott wave analysis, Time cycles give us perfect timing to capture next move.
Stay Tuned for the most Advanced Training session in field of Technical analysis by Ashish Kyal,CMT of Waves Strategy Advisors on Time Cycles and Advanced Elliott wave concepts – NEO Wave combined with JM Hurst Time Cycles to forecast the Elliott wave pattern that can be formed with very high degree of accuracy.
Register now with your contact details and get event updates.

Wednesday, July 23, 2014

Why is Natural Gas falling since 2008 top? Major downtrend might have resumed!

Natural Gas is a very important Energy commodity and is widely tracked and traded. 
This commodity is important not only from its usefulness during winter but is also heavily traded. A lot of the fluctuations in prices of Natgas is believed to be determined by weather conditions of developed nations like Canada, USA, UK where it is most consumed during cold weather conditions.
However, predicting weather is not our forte and we leave it best to the weather experts to determine the temperatures across the globe and to environmentalist who are worried about Global warming.
We are chartist and Elliotticians that uses charts of commodities or for that matter any freely traded asset class to determine the trend and trade in that direction irrespective of weather forecasts. The below is a weekly chart of Natgas since 2008 onwards and the commodity is in major downtrend for more than 6 years now. 
Natural Gas weekly chart:
Wave Analysis:
As shown in weekly chart of Natural Gas, from the start of 2012 prices were moving higher in upward moving channel. Each time prices respected the channel support and accordingly moved higher. However, this time scenario is different where prices have broken below the channel and currently consolidating below the same. This suggests that prices might start correction on downside over short term to medium term. We have also shown small downward moving red channel. Currently it has arrived near the support of the same. It is very difficult to say at current level that prices will break down from this channel. Hence, one should form trading strategy as per important support and resistance levels. In the entire down move from 285 to 250 levels not a single weekly bar has given close above prior bars high and trend continued on downside. As long as this structure remains intact trend is negative and the day we will see close above prior week’s high that will be the first confirmation that relief rally on upside may come.
As shown in Daily chart, (shown in actual report)
In short, any move below 245 will take prices towards 225 levels where next support comes… This was mentioned in our morning research report on 17th July and Natgas has already hit the low at 227.10 levels on MCX today morning. The trend has just started and there is more to it.
To know what is next in Energy, Base metals and Bullions like Gold and Silver and to trade based on calls with efficient risk reward ratio subscribe to the daily intraday and positional advisory and receive complete follow-up on trades right from entry, partial profits to exit strategy on Yahoo messenger or via SMS. For more details or free trial contact us at helpdesk@wavesstrategy.com, Call us on +91 22 28831358 / +91 9920422202. Receive research reports absolutely free along with daily intraday advisory for justification on why we have given the call.
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Tuesday, July 22, 2014

Do you know the importance of Time cycles? Have you decided your time frame of investment?

On 10th July we published an article on stock CESC where we forecasted the future path of this stock 
with the help of advanced concepts like Time Cycle along with Moving average and channeling technique. While trading one should always understand the two important elements, Price and Time. To be a successful trader it is imperative to keep this both the element on his/her side because without perfect timing intraday trades gets converted into positional and eventually into loss but later only seeing it going in your favor because you didn’t timed it well. Hence applying concepts like Time Cycle gives timing to catch top or bottom in any of the asset classes.
CESC daily chart (Anticipated on 10th July 2014)
CESC daily chart (Happened on 14th July 2014)
In previous article on 10th July we mentioned that Moving average: We have applied 10 days moving average which is on verge of breaking. Break of the same will open more negative possibilities. Time Cycle: of 118 period is working brilliantly in this stock. This Cycle is topping cycle and currently prices have formed short term top almost at Cycle day. In short, looking at the bar technique, channeling technique and Time Cycle our outlook for this stock is negative and we can expect a level of 635 followed by 615in coming trading sessions.” BANG ON!
Happened:In the above chart we can clearly see that prices achieved our mentioned target on downside near 615 levels. So, what should be the strategy for CESC as of now?
Time your trade with perfection!
Stay Tune for the most Advanced Training session in field of Technical analysis on Time Cycles and Advanced Elliott wave concepts – NEO Wave combined with JM Hurst Time Cycles to forecast the Elliott wave pattern that can be formed with very high degree of accuracy.
Register now with your contact details and get event updates.
To know how we apply Elliott wave counts on charts of Nifty and stocks subscribe to the daily research report “The Financial Waves update”and see yourself how we are forecasting using Elliott wave and short to medium term path Nifty can follow.  http://www.wavesstrategy.com/index.php/store.html

Thursday, July 17, 2014

Rpower: How to interpret impulsive and corrective waves?

The below chart of Rpower gives a detailed view on how to find out impulsive waves?
It is a classical example that shows clear 5 waves on upside with faster retracement of wave v confirming a reversal. Also note that wave v is truncated which suggests that we should see a sharp move on downside which is its typical post pattern implication.
Reliance Power 60 mins chart:
There are 3 important rules to define an impulse pattern:
1.    Waves 2 should not retrace more than 99% of wave 1. Advanced concept suggests that wave wave 2 should not retrace more than  61.8% of wave 1.
2.    Wave 3 cannot be the shortest of wave 1,3 and 5.
3.    Wave 4 should not enter into territory of wave 1. As per Advanced concepts wave 4 should not enter into territory of wave 2.
All of the above rules are being followed.
A completion of 5 impulse on upside is confirmed once wave v is completely retraced in faster time.
This guideline helps us to confirm that an important top is in place.
In addition to above, below is the interpretation of the stock published today morning in “The Financial Waves short term update”
Wave Analysis:
Power sector continued to be under pressure as even in yesterdays strong up movement we did not see much relief rally in power stocks. It is interesting to see how stocks behave despite all the positive news revolving around infra and power projects. On Budget day, a lot was expected and was delivered for Infra sector but still this was the most underperforming sector in the recent down move post Budget. We continue to believe that the news or events cannot be used to trade objectively.
Reliance Power had been underperforming since the start of June 2014 after it touched the intraday high near 110 levels. The stock formed wave v below the previous wave iii and is therefore known as truncated pattern. A truncation leads to sharp down move which can be clearly seen in the above daily chart and prices touched 90 levels in just 3 days of fall from the high of 110.
As shown on daily chart, (shown in actual report)
The 60 mins chart, shows the impulsive subdivisions clearly and now prices are in wave b. Any move back below 90 will confirm that wave b is over and wave c on downside has started towards 80 levels.
In short, from trading perspective it is better to wait for reversal in this stock and broader market on downside. Close below 90 will provide good trading opportunity for a move towards 82 – 80 levels on downside. On upside 102 should act as a strong resistance.
Subscribe now and get instant access on Nifty and 3 stocks along with charts and advance technical tools.

Tuesday, July 15, 2014

Nifty path ahead as per Elliott wave and Channels!

The below research was published on 14th July morning before equity markets opened. To susbcribe to this daily research report "The Financial Waves short term update" that has Nifty along with 3 other stocks with detailed Elliott wave counts and applied technical analysis visit http://www.wavesstrategy.com/index.php/store.html

Bottom Line: Nifty continued its downtrend even after better than expected Infosys results which failed to cheer the street!

Nifty daily chart:

Announcements:

“The Financial Waves Monthly Update” is now published. The current research focuses on Sensex from medium to long term perspective and why we think that major rally to start before mid of next year 2015. We have analyzed how Sensex has reacted 1 week prior and 1 week post Budget.The amazing relationship between Nasdaq100 and CNX IT. Price action of Dow Jones , Sensex and Crude during War and Crisis. Steel Authority of India Limited (SAIL) exhibits good opportunity from investment perspective and long term path. USDINR analysis based on Elliott wave theory, Fibonacci retracement and RSI. 
Subscribe monthly research report “The Financial Waves Monthly update” by visiting http://wavesstrategy.com/index.php/store.html and see yourself the long term forecasts and world markets at a glance.      

Nifty 60 mins chart:    
Pls note the below is as of 14th July morning research report:

Wave Analysis:

In previous update we mentioned that “In short, the roller coaster ride of yesterday produced intraday swings of nearly 545 points - enough to raise pressure of even the most conservative trader!!! For Nifty, there is no change in our outlook that the trend remains negative and existing shorts can now use 7700 level as stoploss.”

Nifty continued it’s down move even when the IT bellwether Infosys announced better than expected results. The stock was initially up by 4% but managed to close positive by mere 1%. Nifty touched high of 7625 during opening hour but soon the optimism fizzled out and index touched intraday low near 7450 levels.

We are showing the probable path index is going to follow till July end. As shown on daily chart, there is a short term bounce back possible. The fall of Friday on intraday basis was very tedious and taking lot of energy. Each minor leg on downside was reversed by intermittent buying and short term charts clearly reflects some loss of momentum. On contrary break of 7500 level should have pushed index directly towards 7450 levels without much buying interest but 15 mins chart showed frequent pullback even sub 7500 levels. The trend continues to be negative but one should not be surprised to see pullback again if prices reverses back above 7500 level.

The other concerning factor for the down move is the Put-Call parity. We are seeing constant deterioration in Put options value and at the money Put option of 7500 increased by merely 30 points when index fell by more than 100 points. There is absolute lack of interest in Put buying and this is concerning for the down move. This indicator has worked very well in the past and so cannot be completely ignored. These are the reasons why we expect the fall will probably lack intensity.

As shown on 60 mins chart, prices are moving down in red channel and as long as this channel is intact trend will be negative. However, wave c is now equal to wave a and there is a possibility of bounce back in form of wave x back towards 7600 once this c leg is over. The weekly bar has closed decisively negative and bounce back will be short lived. From trading perspective, it is better to be less leveraged and use bounce back towards higher levels as shorting opportunity rather than creating it on break of previous lows.


In short, the direction continues to be negative as long as prices do not close above 7500 levels. The path that Nifty can travel over next few weeks is as shown. Move above 7550 can result into a deeper retracement towards 7630 whereas any move below 7440 will continue the current downtrend but maybe slower than previously expected!  

In today's morning report itself we mentioned "The short term chart shows that the down move is in the form of a-b-c correction so far. A close above 7500 will indicate that wave c might be over and the up move in the form of wave x towards the channel resistance is possible. The reason for expecting a complex corrective structure involving x wave is that each of the legs of correction is perfectly channelized. Systematic fall with all points touching on channel leads to a complex correction. RSI is also showing some minor positive divergence that can lead to sideways to positive consolidation."

To get realtime updates and susbcribe to this daily research report "The Financial Waves short term update" that has Nifty along with 3 other stocks with detailed Elliott wave counts and applied technical analysis visit http://www.wavesstrategy.com/index.php/store.html

Friday, July 11, 2014

Nifty and Budget! What is next?

The below research is picked up from the morning report "The Financial Waves short term update" for more details visit http://www.wavesstrategy.com/index.php/store.html 

Bottom Line: Nifty indeed kept the traders on pressure cooker till closing. Finally even the best of the Budgets failed to produce desired impact on index!

Nifty daily chart:


Announcements:

“The Financial Waves Monthly Update” is now published. The current research focuses on Sensex from medium to long term perspective and why we think that major rally to start before mid of next year 2015. We have analyzed how Sensex has reacted 1 week prior and 1 week post Budget.The amazing relationship between Nasdaq100 and CNX IT. Price action of Dow Jones , Sensex and Crude during War and Crisis. Steel Authority of India Limited (SAIL) exhibits good opportunity from investment perspective and long term path. USDINR analysis based on Elliott wave theory, Fibonacci retracement and RSI.

Subscribe monthly research report “The Financial Waves Monthly update” by visiting http://wavesstrategy.com/index.php/store.html and see yourself the long term forecasts and world markets at a glance.
       
Nifty 60 mins chart:  
 Wave Analysis:

In previous update we mentioned that “Today is the Budget day and volatility will be high. Closing will be crucial and looking at the overall pattern and counts we are expecting a downside move today of anywhere near 3% looks possible! In short, the trend continues to be negative and if we are looking at the pattern correctly the selloff will intensify from here. Use 7720 as crucial stop level for short positions and preferably on closing basis due to event.”

The movement of Indian equity markets indeed kept all the traders on pressure cooker whether on long or short side until closing. Nifty traded in narrow range till 11.30 and market reacted negatively during 1st part of the Budget. It was later after the announcement of Direct and Indirect taxes and road map shown to cut down Fiscal deficit that Nifty showed a strong move from the lows of 7480 to the high of 7730. The twist in the trend happened exactly at crucial levels near 7500 on downside and near 7720 levels on upside. Bank Nifty as expected was most sensitive to the budgetary speech but closed negative by more than half a percent. The only sector that sustained with strong gains was real estate stocks after the REITs announcement. In totality, it seems the event produced strong spikes on intraday basis but Nifty finally resumed its short term downtrend. Also as expected the difference between high and low has been nearly 3.30% which we very clearly mentioned in our detailed update on Budget in current Monthly research report published on 3rd July. 

A close observation shows that yesterday’s movement was very similar to that of the Budget day movement of 16th March 2012 where the top was formed 2 days back and there was a strong spike on upside but Nifty finally closed in red. On next day the selling pressure continued. If we are linking the current pattern correctly to that of Budget day movement in March 2012 then the downtrend should continue today as well.

As shown on daily chart, Nifty formed an outside bar which does not change the short term trend and keep it negative as long as close above the previous day’s high is not seen. Volatility can continue even today and we expect 7500 to eventually fail to provide any support. Trading intraday on events like this can be both financially and mentally exhausting if caught on the wrong side of the trend exactly at the wrong time. We therefore prefer using closing levels on events day.

It seems that an important top is in place at 7800 level and this level should remain intact atleast till 25th July or end of the month. Prices are now moving down in the form of a-b-c correction and wave b got completed near yesterday’s high at 7730. As long as the short term red channel shown on 60 mins chart is intact the trend will continue on downside. The probable target once 7500 breaks is towards 7250 levels. 

Infosys result due today will result into further volatility during the day. The stock showed down move and made a low exactly on channel support near 3250. Break below this level can result into sharp move towards 3050 whereas any move back above high of 3380 will keep the positive outlook intact. The negative bar created yesterday has raised some doubts on the internal strength of this stock and on the validity of Head & Shoulder pattern. Nevertheless, break of 3380 will be strongly positive. But for now it is better to wait for either of the levels to break for clarity!


In short, the roller coaster ride of yesterday produced intraday swings of nearly 545 points - enough to raise pressure of even the most conservative trader!!! For Nifty, there is no change in our outlook that the trend remains negative and existing shorts can now use 7700 level as stoploss. Break of 7500 will be crucial and selling pressure will intensify taking index towards 7250 support zone! If our wedge assumption is correct we should see intensity in selling pressure after some consolidation.Also if a strong positive Budget cannot drive the uptrend I am not sure what will result into upside reversal now! 

Attend the 2 days training workshop that will apply not only Elliott wave but other important techniques and Time cycles to capture the major turning points. Timing the turns is equally important along with Price projections and we will be discussing the current scenario and future path right from short term to long term forecasts till 2020 on Sensex, Gold, USDINR and much more!
For more details about the Educational workshop on 12th and 13th July, Contact us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / +91 9920422202. For subscription to daily research report visit http://www.wavesstrategy.com/index.php/store.html

Thursday, July 10, 2014

Budget Impact on stock markets! Why is Nifty falling?

The analysis will start on what was expected in Budget and what was delivered.
strong negative close today will result into following news:
“BUDGET fall short of expectations with no concrete plan to reduce Fiscal deficit even when aggressive targets are given”
If equity markets manage to close positive and recovers from the lows following can be probable news we will hear or read:
“BUDGET addresses all the important aspects to revive the economy. A very balanced approach is shown by the new government within its 45 days of Budget. Markets are also optimistic about the efficient execution of the proposed plans”
The news will be focusing on negativity if Nifty closes in red whereas it will focus on positive aspects of the event if Nifty closes in green. Case in point: is news will change based on the outcome of the markets which is leading. We believe that events can result into spikes but that lasts only for few mins or few hours or few weeks and eventually the trend resumes.
Taking trading decisions based on news can be disastrous as news can change to fit the market movement. Even a very well drafted Budget will be perceived negative if there is across boardselloff and viceversa. We use Advanced technical analysis concepts like Elliott wave, Time cycles, Channels, Fibonacci ratios. The below chart was shown on 23rd June 2014
Nifty daily chart: expected since 23rd June 2014
Happened as of today: 1 pm
Nifty made a top at 7808 and reversed from there. Index witnessed a fall of more than 220 points from there making a low of 7479. We do not rule out short term spiky movement during the Budget but a trend should emerge probably by tomorrow after the event news is digested.
On downside 7500 will continue to be an important level to watch. But will Nifty manage to protect it? To know what can be trend from here and how we expect the month of July to span out subscribe to “The Financial Waves short term update”.
Attend the 2 days training session to be held on 12th and 13th July 2014 in Mumbai on Applying Elliott wave Time and Price concept and how to derive trades. For more information contact us at helpdesk@wavesstrategy.com or call us: +91 22 28831358 / +91 9920422202. For more details visit http://www.wavesstrategy.com 

Wednesday, July 9, 2014

Bank Nifty: How to apply channels, RSI, Time cycles to understand trend?

The most basic concept of technical analysis is to trade in direction of a trend. But trend is a relative concept and it depends on the time horizon one is willing to trade.

For an intraday trader the trend changes daily, for a swing trader the trend is positive if the weekly close is above previous weekly high and negative if weekly close is below previous week’s low. For an investor, the minor fluctuations are least important but the trend is looked by confirming higher highs and higher low formation on monthly scale. So depending on the time horizon one wants to trade the trend will change. It is incorrect to simply state the trend is negative without the time element connected to it.

The below chart of Bank Nifty clearly shows how we identify trend from short term perspective which can assist for Positional or Derivative trader!

Bank Nifty Daily chart:
  
  
Elliott Wave Analysis:
Indian equity market dramatically reversed on downside in last trading session and closed with a loss of more than 2%. The sell off was witnessed across the board. Bank Nifty index which was unable to take out the high of 15750 made on Election result day, finally showed momentum on downside and lost 2.40%. It seems that Bank Nifty was just waiting for whole market to be in sync so that it can start its trending move on downside. Currently prices have arrived near the support of the range and looking at the sharp down move there is high probability that Bank Nifty will break consolidation range which is intact from last 35 trading sessions.

As shown in daily chart, from the mid February 2014 prices moved higher in upward moving channel. Internal wave counts suggest that in the end of June 2014 minor wave (iv) completed at the lows of 14950 and since then prices were drifting higher in form of minor wave (v). Now, break below 14700 will indicate that minor wave (v) has truncated at the highs of 15582 and correction on downside has started. RSI which gauges the internal strength of prices is exhibiting series of negative divergence which suggest that Index has been losing momentum on upside.

We have applied Time cycle of 318 days which is working very well. Most of the time this cycle has worked as a topping one. As per this Bank Nifty has made top at 15750 on election result day and since then prices were unable to take out the same which suggest importance of this cycle.

As shown in 60 mins chart, (shown in actual report)....

In short, all eyes should beon 14700 levels. Any break below the same will take prices towards 13000 where 50% retracement is placed of the prior up move from 10000 to 15750. 

To subscribe to this daily research report which has views on Nifty along with different indices and stocks visit http://www.wavesstrategy.com/index.php/store.html 

Attend 2 days training workshop on How to trade using Elliott wave, Time cycles and Fibonacci ratios on 12th - 13th July. For more information visit http://www.wavesstrategy.com/index.php/free-articles/trading-lessonsa-education/907-elliott-wave-training-along-with-price-and-time-concepts.html