Monday, December 22, 2014

Nifty bounced back from 76.4% Fibonacci retracement at 7960, Elliott wave structure of up move crucial!

Bottom Line: Nifty continued to move higher but formed a DOJI bar on Friday. Weekly bar has still formed a negative formation.

The below research is picked up from daily report publication "The Financial Waves short term update". For subscription options visit www.wavesstrategy.com 

Nifty daily chart:

  
Nifty 60 mins chart:
Wave Analysis:

In previous update we mentioned that, “In short, close above 8210 - 8215 is important to start deeper correction on upside towards 8380 level where 61.8% retracement is placed of the prior fall. Also it will be important to see the overall breadth and sustainability if Nifty has another Gap up opening!”

Nifty had another Gap up opening on Friday and touched intraday high of 8263 levels. Prices consolidated within the range of 8200 and 8260 for the rest of the day. A very important observation is that Midcap and Smallcap sectors opened strongly but later closed near the day’s low. The overall breadth was also only marginally positive. This behavior is peculiar to wave b formation which is retracing the down move from 8627 to 7960 levels.

As per weekly bar technique, for the third consecutive week prices were unable to take out the high of prior week and closed on the negative note. For weekly trend to turn positive prices have to close above 8265 which is previous week’s high by end of the current week for uptrend to continue. Nevertheless, over short term as prices have given Gap up move on Thursday and Friday the short term trend is positive.

After V shaped recovery prices tend to take important support and resistance near Bollinger Bands®. So we have applied this technique on hourly chart. The resistance as per this technique is now near 8320 which is also the previous pivot area and the support continues to be near 7960. The Bollinger Bands width has drastically increased to rise in volatility and should narrow down over next few days giving more accurate turning areas.

From wave perspective, we are expecting the current ongoing move as wave b formation which can retrace anywhere near 8370 to 8470 levels which is the 61.8% to 76.4% retracement levels. However, it will be crucial to observe if prices continue to protect the recent Gap areas. On downside as long as 8080 level is protected the upside correction can continue.

In short, the near term trend is positive for now as long as the Gap area near 8150 followed by 8080 is protected. It will be crucial to see if this rally can extend beyond 4 days. We will keep an eye on broader market and high beta stocks for more clues on the overall strength.

Subscribe to the Monthly and Short term research reports “The Financial Waves” and get detailed insight into the crucial levels along with Elliott wave counts, applied technical studies and much more, Speak with our research desk for any doubts! Get in touch with us at   helpdesk@wavesstrategy.com or call on +91 22 28831358 / +91 9920422202. Visit www.wavesstrategy.com




Wednesday, December 17, 2014

Nifty: How applying Time cycles, Indicators and Elliott wave helped us capture the top?

In our monthly research report “The Financial Waves Monthly update” we have warned our subscribers exactly at the time it was needed most. 
It takes lot of courage and belief in the techniques you follow to stand against the crowd when the euphoria is at its peak.
Go ahead and read below the various different techniques we applied that all pointed out that the uptrend in Indian equity markets and Nifty was a “risky affair”and not worth the drawdown which might happen…
Figure 1:Nifty weekly chart
Happened:
Following is a part of research report published in our “The Financial Waves short term update”Read yourself why we turned bearish at the time when the majority had been bullish exactly at wrong time!
Indian markets have continued to touch new highs in the month of November. The high made in November was at 8617 and December also started on positive note with prices touching 8627 on 4thDecember. November was more of an upside drifting movement with the trending move not lasting for more than two days even on upside. There has been lot of euphoria being created every time prices touches new highs but it is crucial to also acknowledge the fact that everytime a new high istouched the broader market has failed to confirm.
Advance Decline line:The best indicator to measure how the broader market has been performing is the Advance decline line. (shown in actual research report) above shows the red line which is the AD line. It has been constantly forming lower highs and lower lows and in November as well there has been a sharp down move.  AD line touched the level of -2000 which was previously seen in mid of May. So this up move which has been on lot of euphoria and optimism is not supported by the broader market.
Figure 1 shows Nifty weekly chart along with 84 weeks Time cycles.This cycle is a part of Hurst cycle itself shown previously but only on a broader frame. Any correction can either happen in sideways formation or downside (assuming prior trend is on upside). The correction seen from in 2008 was sharply on downside and the low was formed near the cycle low date. The next correction was in sideways formation as prices simply oscillated within a range from October 2009 to May 2010. The next set of correction in 2011 was again on downside followed by sideways correction in 2013. If the pattern of alternate type of correction between sideways to downside is valid and still working then we should indeed see a downside correction going forward.
Monthly Bar technique: Now let us look at the Monthly bar technique to understand the crucial support zones. …..
Commodity crisis: The current research is focusing on the commodity markets and global commodity stocks given the fact that this time the risk has drastically increased for companies or stocks that trade in commodities and even for commodity producing countries. A sharp rise or fall results into eventualities that are difficult to predict beforehand and looks obvious in hindsight. Sharp fall in Crude Oil prices along with commodity producing companies worldwide is hinting towards the increased risk in this asset class. A strong trend will ignore the actions of government or decision makers and we have seen the example of 2008. If Crude prices continue to strongly trend on downside, even the output cut by OPEC will be futile in changing the trend of commodity which will then put lot of pressure on companies directly or indirectly linked with production or refinement of Crude oil.
In a nutshell, looking at the overall breadth, momentum and sector participation we continue to look at the current uptrend as a risky affair
In our short term research report on 8th December 2014In short, Indian markets continue to trade at crucial levels and a trending move is due now. It is better to await either a close below 8500 followed by 8430 or above 8627 which is the spike high for confirming the direction of trend.Indicators and other methods have been showing absolute loss of momentum but it is prudent to wait for prices to confirm which it should in this week!
In our short term research report on 9th December 2014In short, lower highs lower lows formation on short term chart, bar technique and Elliott wave theory suggest weakness to prevail in Nifty. On upside as long as 8590 followed by 8627 is intact trend will remain bearish. Close below 8430-8420 levels will be important to continue downside correction.
So if anyone have doubts whether the current fall was predictable amidst the optimism and euphoria using objective techniques the above research reports are much more than the evidence to prove the validity of technical studies and Elliott wave theory we have been following!
Nifty has broken below all important supports but is this right time to enter fresh short positions? We do not think so as Risk – Reward is not favorable. So what should be Trading or Investment strategy?
Subscribe to the Monthly and Short term research reports “The Financial Waves” and get detailed insight into the crucial levels along with Elliott wave counts, applied technical studies and much more, Speak with our research desk for any doubts! I am conducting a 2 days online training course on Elliott wave and will discuss various methods used for catching the recent top. To attend the training get in touch with us at   helpdesk@wavesstrategy.com or call on +91 22 28831358 / +91 9920422202. Visit www.wavesstrategy.com

Tuesday, December 16, 2014

Why we have been bearish on Indian Equity markets when literally everyone turned bullish exactly at wrong time!



Why we have been bearish on Indian Equity markets when literally everyone turned bullish exactly at wrong time!

For more details please visit www.wavesstrategy.com 

Nifty - A bigger trend is about to reverse by Ashish Kyal on Zee Business



Nifty - A bigger trend is about to reverse to downside by Ashish Kyal on Zee Business. Each of the technical indicators aligned together which helped us to capture a perfect top on Indian Equity markets!

Everyone has been talking about selloff in Crude Oil beneficial to reduce Inflation but people are forgetting other side of the equation i.e. the strong sell off in Commodity prices is indicating extreme weak Global demand which will adversely impact India...

For subscription to daily research reports and advisory visit www.wavesstrategy.com

Monday, December 15, 2014

Nifty reversed exactly as expected from channel resistance. An Elliott wave perspective!

Nifty showed strong reversal exactly from the channel resistance we have been showing for many months! Short term moving averages are decisively broken!
                           
Nifty daily chart:


Announcements:
Distance learning: Online Training on Elliott wave will be conducted by Ashish Kyal, CMT on 18th and 19th of December 2014. The telecast will be via Google Hangouts on air.

For registrations, get in touch with us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / +91 9920422202.


Nifty 60 mins chart:

Wave Analysis:

Nifty formed a strong reversal bar in previous week and broke the important support levels of 8430 and even 8290. It seems the strong uptrend has terminated after forming an Ending diagonal pattern at the top of 8627 which was with an exhaustion gap. The same day itself we mentioned about a “key reversal day” possibility and Nifty has continued to move sharply lower after that. 

In the recent monthly update itself we have shown medium term time cycles and highlighted how the current uptrend has been a “risky affair” for fresh longs to be entered along with key focus on commodity and commodity related stocks that can be worse hit during the down fall. In past few days of selloff Metals have continued to be one of the strong underperformers.

On a weekly basis, prices have made Evening star pattern which is a classic reversal pattern as per candlestick technique. One single weekly bar has retraced prior 5 weekly bars completely. This is also one of the strongest negative weekly bar from prior week’s high since the rally started from 5118 in August 2013. The reason for emphasizing on the weekly bar intensity is to highlight the magnitude of reversal even when interest sensitive sectors like Banking has managed to show resilience!

From sectors perspective, apart from Pharma, all the sectors closed in red territory. Bank nifty is moving in sideways action post the selloff from 18880 to 18180. Now, move below 18180 will make lower high lower lows formation and suggest that top has been made in Bank Nifty. On upside 18600 will act as an important resistance where 61.8% retracement of the prior fall is placed. In the evening of Friday IIP data for the month of October and CPI data for the month of November has been released. IIP for the month of October has slipped to 3 years low of -4.2 % against expectation of 2.1%. Whereas CPI has cooled to 4.3 % against the expectation of 4.4%.  Now, looking at the price structure of Nifty there is high likelihood that market will react negatively and current downtrend will continue further.

As shown in daily chart, we continue to think that important top has been made at the level of 8627 levels as post that prices have been showing impulsive down move. As per wave perspective, there is high probability that intermediate wave z of Complex correction pattern which started in the month of August 2014 is complete at 8627 levels and next leg on downside from medium term perspective has started. Prices continue to follow bar technique very well and not taking out the high of prior bar. As long as this structure remains intact trend will remain bearish.

It is prudent to avoid catching a low in the current fall and we have seen the waves extended during the fall of Crude.Existing short positions should follow trailing stop method and avoid catching a low in this impulsive down move. Use 8350 as crucial risk management level.

In short, the trend will remain negative as long as 8350 is protected on upside. Move below 61.8% of the prior up move which is near 8080 is going to be crucial to further confirm start of a higher degree downtrend!

Subscribe now for the daily research report "The Financial Waves short term update" and see yourself why Indian markets are at very crucial juncture. The daily morning research will give insight in stocks and other indices as well. For subscription options visit http://www.wavesstrategy.com/index.php/store.html