Wednesday, November 26, 2014

Nifty had a very important day with heavy volumes – A crucial juncture!

Bottom Line: A huge volume day with strong selling pressure seen in Midcap and Smallcap sectors. Follow-up action will be very crucial.
Yesterday was a very crucial day with lot of vital technical information. The major index Nifty showed a correction of nearly 100 points compared to previous day’s close at one point of time and touched an intraday low near 8430 levels. The fall of more than 100 points was previously seen on 16th October 2014 (in wave b) which started with a fall of 138 points on 23rd September 2014. From closing perspective, in this entire up move from 7724 to high of 8535 yesterday registered the most negative day with -67 points. Yes, the entire up move did not have a single bar closing negative by more than 67 points. The next most negative bar was only at 43 points. To add to this, the volumes had been the highest seen only in the Election month – May 2014.
Nifty 60 mins chart:
Overall breadth and momentum!
The overall breadth was extremely poor with merely 274 stocks advancing on NSE compared to 1232 declining. More than 80% of the stocks closed negative and even Midcap index registered heavy volumes. All the sub-indices except Healthcare and Oil & Gas closed negative. Oil & Gas managed to close positive due to late recovery in heavy weight like Reliance and ONGC. BSE Smallcap closed negative to the extent of 2.32%. The reason for emphasizing so much on breadth is because this indicator has continued to deteriorate all the while Nifty was touching new highs.Also such severe selloff in broader market is a precursor of a bigger degree correction or occurs after a sustained down move to create panic lows. However, follow-up price action is very important and it will be crucial to see if prices can manage to break the previous day’s low near 8430 levels.
In short, these are going to be interesting times and if Nifty indeed moves below ……. followed by …….. in faster time it might be take majority of the crowd by surprise amidst all the euphoria and optimism.It is time to sit tight and keep a watch on the mentioned levels for getting confirmation of the trend. Just one day of fall is too soon to conclude completion of a trend!
Subscribe now to “The Financial Waves short term update”daily research report. It is extremely crucial to keep tab on the important support levels of Nifty for confirmation of trend which is due to start! Simply visit http://www.wavesstrategy.com/index.php/store.html and get instant access to research reports delivered everyday morning on your email address

Friday, November 21, 2014

Gold has continued to protect 25000 levels! Will this magic number remain intact?

Gold has lost all of its shine over past one year. For us this is no surprise and we have been expecting the down move in precious metals. You can refer the article which we published on 16th May 2013. The gist of that article is as follows: Here is the link if you would like to read the original article: http://www.wavesstrategy.com/index.php/free-articles/precious-metals-gold-a-silver/464-will-gold-lose-its-shine-or-will-yellow-metal-glitter-again.html
Indians love for Gold should slowly fade away. When Gold prices started falling from life time highs of 32500 levels investors and traders started buying yellow metal on minor dips.
There were systematic investments being made at each fall around 31550, 30900, 29900 but only to see it capitulate towards 25500 levels. If we have unlimited supply of resources buying on every dips can be a prudent strategy but unfortunately our resources does not allow us to increase our investments beyond one point of limit and we then become slave to the price movement and only hope for higher prices.
For us Gold is no different than any other asset class like Equity, Industrial metals, Currency or any other freely traded markets. Gold will have same faith that each of these asset classes had after exponential rise or rather secular bull trend. Gold has been in secular uptrend since the lows of 5000 in 2004 levels. The memory of investors or traders is very short and people tend to forget what has happened to equity markets in 2008 itself let alone the idea of what has happened to Gold from 1982 to 2002 when Gold gave negative real returns for more than 2 decades.
The below chart explains what has happened to Gold during 2 decades of downtrend:
The below chart shows the movement of Gold currently:
MCX Gold Continuous Daily chart:    
                          On 16th May 2013 we mentioned the following 2 most important lines:
“Gold has been constantly forming lower highs and lower lows which is a classical indicator of the direction of trend. It requires little explanation and justification why Gold will eventually lose its shine!”
Now Gold has come close to the magic level of 25000 which it has managed to protect since the May of last year but the entire year of sideways correction in an inflationary environment is nothing but a negative return.
To know whether Gold will protect this magic number of 25000 and bounce back from here back towards 30000? Subscribe to “The Commodity Waves update” and get insight into GoldSilver,Crude and Copper.Do not want to worry about analyzing charts yourself but would like to trade then you can subscribe for the intraday / positional advisory in commodities and get access to research reports absolutely FREE! For subscription options visit http://www.wavesstrategy.com/index.php/store.html

Wednesday, November 19, 2014

Nifty: A trending move is about to start! Applying ADX Indicator!!

Indian Equity markets:Nifty oscillated within the range of 8450 and 8410 levels yesterday.
It seems the buying interest is waning out as even if index hits new highs the momentum is not increasing. Prices have continued to drift on upside rather than trend. Yesterday, stocks like RCOM,RCAPLT that were looking weak showed strong upside move whereas defensive stocks from IT,Pharma closed negative. This type of rotational movement has helped index to hit new highs but failed to generate trending move. Also for a positional trader selecting the sector during such environment remains challenging. However, such price action cannot continue for long and eventually a trending move should start.
To understand if a trending move is due one can use Average Directional Index (ADX) indicator. The below chart is picked up from the morning research report “The Financial Waves short term update” published daily to subscribed clients before market opens. To subscribe this research report, visit http://www.wavesstrategy.com/index.php/store.html
Bottom Line: Nifty has been struggling to show momentum even on upside. It seems market is testing patience even for best of the traders!
Nifty daily chart:
Wave Analysis:
In previous update we mentioned that “In short, as Nifty managed to take out previous week high the short term trend is positive. The next resistance level for Nifty is near 8490 on upside with pivot support at 8320 as move below it will also break the important ii-iv trendline.”
Applying Average Directional Index indicator (ADX) along with +DMI and –DMI.
We are showing Average Directional Index (ADX – black) along with +DMI (blue) and –DMI (red) indicator. This indicator represents if a trending move is due to start. The black line when moves above the 25 level normally results into trend. However, it does not signify the direction of trend i.e. upside or downside. For directional confirmation we need to see crossover between +DMI and -DMI. The best of the trend was seen in period March to June 2014 when black ADX line sharply moved higher. Post that the continuous fall in its level is an indication of consolidation and non trending moves. Price action reflects that post July even when Nifty is moving higher it has been intermittently stopped by reactions retracing the up move by nearly 61.8% to 80%. ADX line is now showing some up move and this can indicate that a trending move is due to start.If a red line manages to cross above the blue line the trend will start in downside direction whereas if blue line reverses back above previous high of 42 the breakout will be on upside.
Combining ADXwith other techniques of Channels, Time cycles, and Elliott wave counts our expectations is …….. trend to emerge. However, it is prudent to keep a tab on this indicator to get confirmation along with price reversal. An indicator will be useful only if prices confirm the breakout direction.
In short, looking at ADX we can conclude that the trending move is due to start. Short term wave counts are suggesting prices are in final wave ……… and the direction of breakout can be on ………. But it is prudent to wait for confirmation below the level of …...
We have been mentioning again it is time to stay alert rather than complacent and laid back. This sideways action is going to last for long and a trend is going to emerge soon. Many of the indicators and advanced technical analysis techniques are getting synchronized after many months. To know the direction of breakout and why volatility is about to increase subscribe to “The Financial Waves short term update” and get instant access to the research report with stocks and Nifty from short to medium term direction with crucial support and resistance levels. For subscription visit http://www.wavesstrategy.com/index.php/store.html

Monday, November 17, 2014

Nifty continue to trade in sideways action but near important channel and Bollinger Bands ®

Bottom Line: Prices continue to trade near the cluster of channel trendlines and important Time cycles. We are entering in third week of November!

The below research was published today morning in "The Financial Waves short term update" by Waves Strategy Advisors. For subscription options visit http://www.wavesstrategy.com/index.php/store.html

Nifty daily chart:

 

Announcements:
“The Financial Waves Monthly Update” is now published. The current research focuses on Understanding the Global phenomenon: The month of October witnessed huge volatility across the Global markets. It becomes important to look at the Global charts from across the continents to understand how each of these equity markets has fared. Bank Nifty outlook, CRB Index forecast, Sintex Industries Long Term Forecast and Outlook on USDJPY and JPYINR

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Nifty 60 mins chart:                                                    
Elliott Wave Analysis:
In previous update we mentioned that In short, one should trade as per the Bollinger Bands unless a clear trending move emerges. The support as per this band is near 8310 and resistance is near 8415 levels. Decisive close above or below these levels will be required for meaningful trend.”

It has been 8 trading days in sideways action for Nifty even during the result season. Prices have been constantly failing to cross above the 8420 level and at the same time protected the important short term support near 8290.

Applying Basic technical analysis: Channels are the most basic and important concept of technical analysis and we have seen in past how well it tends to work most of the times. On daily chart, we are showing a very clearly visible black channel that is connecting the lows of 5118 made in August 2013 and 5920 made in February 2014. Both of these lows are very crucial that were made just prior to the start of strong uptrend. Projecting a parallel line and connecting the recent highs with high of July 2013 we get the important resistance zone. Since the trendline is upward sloping the resistance is drifting higher with each passing day and is now placed near 8490 levels.

Breakout above this channel with a very strong momentum will be an indication of increase in slope of the trend. However, this is usually the property of an impulse wave. Over here we are dealing with corrective legs on upside as there are no clear internal impulse counts. This when combined with momentum indicator is suggesting loss of strength rather than increase on upside. Further combination of Time cycles – a complete independent study is also suggesting that the medium term trend is in matured stage. Nevertheless, price confirmation is most important and unless we see a strong selloff below 8290 followed by 8200 the above points will only remain as a warning signal.

On Weekly basis, the high and low of previous week is at 8415 and 8305. So a close below 8305 by end of the week will be first sign of weakness. Unless that happens, the weekly trend will remain positive and move above 8415 will resume it higher.

Time cycles: Many of the Time cycles are entering into the negative mode in third week of November which should eventually put pressure on prices. So this week is going to be very crucial and if prices indeed shrug off all the warning signals from supporting indicator we will be forced to adopt alternative scenario.

In a nutshell, the short term trend so far is positive as there is no negative price confirmation. However, one should be aware that the secondary indicators are sending warning signals. If there is strong pick up in momentum and Nifty decisively closes above upper trendline resistance currently near 8490 the current rally will extend further. On the other side, negative weekly close below previous week’s low near 8305-8290 will be first negative price confirmation. Stay alert rather than complacent and wait for prices confirm the direction of breakout! Avoid catching a top unless crucial support level breaks on closing basis!!!

To know why it is time to be alert and prudent to be back from short vacation during correction subscribe to “The Financial Waves short term update” along with the long term forecasts in our Monthly updateOffer: http://www.wavesstrategy.com/payment/ the short term update for 3 months and get the Monthly research report FREE. It is time to act as we do not reach such junctures very often!!!

Friday, November 14, 2014

Nifty: Path ahead using Time cycles with Elliott waves and understanding maturity of trend!

Nifty has moved exactly as expected as per path shown on 3rd November 2014. 
Prices have been moving in sideways correction instead of downside and now retesting the crucial levels. The forecasts shown below are done using the advanced concepts of Technical analysisTime Cycles and Elliott wave theory on 3rd November 2014 – the very next day when index managed to move up by nearly 150 points in single day.
It requires strong belief in techniques that has stood the test of time to predict a correction after strong positive sentiments and gain of 150 points i.e. nearly 1.8% gain in single day.
Now let us go back in time and see the below chart with Channels, Time cycles and Elliott wave counts:
Anticipated on 3rd November 2014 morning research report:
 Happened as of today:
On 3rd November 2014we mentioned that “Now let us look at Nifty from Time cycle perspective:
Hurst Time cycles: are shown on the daily chart that highlights the probable turning junctures. Cycles help us to capture the Time element whereas Neo wave & Elliott wave helps us to understand thePrice projections. At times when prices are moving in complex corrections projecting price with high degree of accuracy is a challenge.
Projecting Time using Neo wave:  One very important pattern described in Neo wave (Advanced Elliott wave) is Diametric pattern. This pattern consists of seven corrective legs (labeled from a to g) and each leg tends to follow equality in terms of price and / or time. The blue box shown on daily chart shows except the first leg that was driven largely by election event, each of the up leg has been tending towards equality in terms of price and time. This when combined with the crucial red channel coincides with the upside range for the current rally as 8350 to 8420. In a nutshell, the probable path is as shown based on Neo wave and Hurst Time cycles but it is prudent to stay in direction of the trend which is currently positive and use 8198 as stop level. On upside, 8350 to 8420 is the next resistance range!”
Happened: Looking at the above chart, one might think that the movement was not on the downside but sideways. Please understand that sideways action is also a part of correction and can be more dangerous. Trading within the sideways action can result into not only financial but emotional loss as well. It makes the trading environment boring and eats up the patience for someone who entered after the rise of 150 points just to keep watching index for sideways action for nearly 8 days in a row. The high made by Nifty within this range is at 8415. This is exactly at the zone we have mentioned in start of November.
Path ahead:
However, by simply knowing beforehand that a correction is plausible whether sideways or downside one can save lot of Time andemotional energy along with possible financial loss.
The above chart does not require much thought process for someone who understands even the basic concept of Channels and trendlines.
To know why it is time to be alert and prudent to be back from short vacation during correction subscribe to “The Financial Waves short term update” along with the long term forecasts in ourMonthly updateOffer: http://www.wavesstrategy.com/payment/ the short term update for 3 months and get the Monthly research report FREE. It is time to act as we do not reach such junctures very often!!!