Wednesday, October 1, 2014

IFTA: Applying Elliott Wave and Time Cycles to Understand the Trend of DJIA – U.S. Equity Market by Ashish Kyal,CMT

Below article was published in International Federation of Technical Analysts (IFTANewsletter in their September Issue

(Click on the image for readability)

Waves Strategy Advisors offer various services across Equity, Commodity, Global and Forex segment. Daily research report, Intraday/ Positional advisory, Long term forecast on Global Markets an Training on Advanced Technical Analysis concepts like Elliott Wave, Time Cycles.


Attend the 2 days training workshop that will provide in-depth analysis on Advanced concepts of Elliott wave – Neo wave and how it can be combined with Time cycles. This is one of themost advanced training in technical analysis. It focuses not only on Price but also on Timewhich is an important element for any trader or investor. There are no shortcuts to Trade or Invest profitably. It comes with lot of research, psychology, objectivity, tested methods. The above study ensures increasing the probability of success while trading and also highlights the area when one should be patient and avoid taking positions. Making money is one thing but to preserve what is made is the Key to trading success!!!
Register before 15th September 2014 to avail Early Bird Offer and confirm your seat today!For registration visit http://www.wavesstrategy.com/index.php/free-articles/trading-lessonsa-education/1005-training-on-neo-wave-a-hurst-time-cycles-in-mumbai.html or call us on +91 22 28831358 / +91 9920422202 or write to us at helpdesk@wavesstrategy.com      


Monday, September 29, 2014

Is there a link between Stock market & Spectacular speech by Mr. Modi at Madison square!

Bottom Line: A spectacular speech by Mr. Modi, our honorable Prime Minister at Madison Square – USA.
Probably the collective growth agenda and execution is going to coincide with April 2015 – a crucial juncture of Time Cycles lows for a path of unprecedented progress in real economy!
Nifty weekly chart:

Announcement 

Training on Advanced concepts of Elliott wave – Neo wave and how it can be combined with Hurst’s Time cycles. 
This is one of the most advanced training in technical analysis. It focuses not only on Price but also on Time which is an important element for any trader or investor. There are no shortcuts to Trade or Invest profitably. It comes with lot of research, psychology, objectivity, tested methods. 
Making money is one thing but to preserve what is made is the Key to trading success!!!

A truly inspirational speech by Mr. Modi at Madison square with a vision of inclusive growth by a nation having the power of “mouse”! I cannot resist myself for stating it here but there is a link between such a rational shift in the thought process and the craving for change within Indians that happened after 30 years by electing a party with such huge majority.
Stock market is a tool to measure the social mood of masses.A period of sideways correction from 2008 to 2013 clearly reflected a period of anxiety and negative social mood during which there is strong rational shift in the thought process of people at large.
People tend to choose extremist during such times which can be probably one of the reasons of creating history after 30 years! Mr. Modi is now attracting record followers and exhibiting prudent leadership by initiating the revolution of fight for inclusive growth in a complete different way. I am neither a politician nor an expert and does not believe in favoritism but a true capitalist and developed economy is not possible without making the majority of population a part of it! I believe Sensex – an indicator that leads the economy is indeed moving towards61000 mark by 2019(a conservative target with clear technical justification given in monthly updates). However, it will not be a one way trip and there will be reactions or corrections to this uptrend one of which we might witness between …….. 2014 and ………….. 2015 before our journey towards 61000 starts! And as Mr. Modi rightly said it will be the people of India that will drive the economy on the growth trajectory and not a single person alone!!!
Subscribe now to our daily Equity Research Report – Nifty and 3 Stocks and Monthly Research Report- Long Term Forecast on Markets and get instant updates. To subscribe visit http://www.wavesstrategy.com/index.php/store.html

Thursday, September 25, 2014

Impact on equity markets: Supreme Court verdict on Coal blocks!

The Supreme Court on Wednesday cancelled 214 of the 218 coal blocks allocated by the successive governments since 1993 and gave the companies awarded coal licenses six months to wind up their operations.
Yesterday was an eventful day for the markets and Nifty reacted lower as soon as the announcement came out. However, later both Nifty and Sensex entered managed to enter into green territory even when the news was perceived as bad for majority of PSU Banks and Power stocks.
A person simply looking at the index might be surprised to see a positive tick from lower levels which do not seems logical at the face of it. The other argument can be contribution from defensive stocks that helped index to end higher despite the negative news but trust me the news would have given too much weightage to the event if Nifty would have ended deep in the red. Case in point is news will change based on the market direction and not the other way around.
Equity markets are discounting the future and are thriving to see ahead whereas the news or events can be a part of past actions. Stocks of companies most impacted have already been falling well before the ruling of Supreme Court. Events can produce short term spikes or movement that will last for few minutes, few hours or few days but eventually the major trend of the market resumes.
So how to trade using objective techniques and which techniques have proven its validity despite all the news and events?
Now look at the below chart of Nifty with Path shown:
Nifty daily chart as on 4th September 2014:
Blue lines on above chart show the direction of trend over next few weeks.
Now look at the below chart and see what has happened as on 24th September 2014
The above chart clearly reflects the movement in synchronization with the path ahead shown in first chart. It also reflects the simple techniques of Channels, Moving averages, RSI combined with some knowledge of Elliott waves. Don’t you think if one knows the path of the trend not necessarily the exact levels it will save you lot of mental and emotional energy when Nifty moved by more than 100 points on upside but then to reverse back down another day with huge volatility?
The above path is not a hypothetical example but was published in actual research report on 5thSeptember 2014 to our subscribers. Even when Supreme Court announced its verdict on Coal blocks in the morning itself following was published in the report yesterday “the trend for now is sideways to negative but prices can manage to close above 8000 ……. On downside 7940 will be very crucial and only a move above 8180 will resume the uptrend. Let us see if prices continue to adhere to the path first shown on 5th September as it has obliged us so far!”
After the verdict, Nifty made a low near 7950 levels and finally closed at 8002 yesterday itself!!!
In a nutshell, it is better to use objective techniques mentioned above than to rely on news outcome for taking trading or investment decisions.Subscribe NOW to “The Financial Waves short term update” and see what we expect from here on.For subscription options simply visit http://www.wavesstrategy.com/index.php/store.html and we will deliver reports to your mailbox on daily basis.
Want to learn the techniques applied to get high accuracy trade setups by yourself?
Attend the 2 days training workshop on most advanced training on Technical analysis – Neo wave (advanced Elliott wave) along with Hurst Time cycles and start seeing the markets from a different perspective! For more information contact us at +91 22 28831358 / +91 9920422202 or write to us at helpdesk@wavesstrategy.com

Monday, September 22, 2014

Nifty: Why knowing prior patterns is important for predicting future path ahead?

Bottom Line: Nifty consolidated after the sharp up move on Thursday. Weekly bar has failed to take out the high of previous week above 8180 which will be crucial for positivity to continue!

The below research is published today in "The Financial Waves short term update". For subscribing to this research on daily basis visit http://www.wavesstrategy.com/index.php/store.html 

Nifty daily chart:

Announcement 

Training Workshop in Mumbai

Attend the 2 days training workshop that will provide in-depth analysis on Advanced concepts of Elliott wave – Neo wave and how it can be combined with Time cycles. 

This is one of the most advanced training in technical analysis. It focuses not only on Price but also on Time which is an important element for any trader or investor. There are no shortcuts to Trade or Invest profitably. It comes with lot of research, psychology, objectivity, tested methods. 

Making money is one thing but to preserve what is made is the Key to trading success!!!


Nifty 60 mins chart:     

Wave Analysis:

In previous update we mentioned that “Sharp down move followed by sharp rise can result into increase in volatility and becomes difficult to comment on sustainability… one should wait for clear higher highs and higher lows formation on hourly scale for getting a good risk reward ratio & trade setup!”

Nifty had a range bound movement on Friday between 8105 and 8160 levels. This movement came after the huge gains of Thursday that was a sharp reversal from the lows of 7925 levels. Many analysts are attributing for sharp rally of Thursday is contributed to FED stand of keeping the rates at record low levels. But the point is Indian markets had a Gap down opening on Thursday itself and if FED would have been the reason for strong performance than we should have seen a strong Gap up in opening hours. News usually follows the market movement that looks logical on the face of it but might not be completely accurate. Case in point is that it is better to adopt techniques like Time cycles and Elliott wave that hinted towards maturity of downtrend rather than betting on news else Nifty would not had a Gap down opening on Thursday.

Now coming back to charts, the weekly bar created in previous week had formed a lower high below 8180 and lower low compared to that of earlier week. It will be very crucial for move above 8180 for the current up move to be sustainable. Also as pointed out earlier many of the stocks are still struggling after the selloff of 16th September and so far have not formed a good base which is important for sustainable up move. To name a few stocks that has given up most of its Thursday gains are SBI, IDBI, ADAG group stocks, Yes Bank, L&T, Reliance Industries, Infosys, etc. Also note that these stocks are spread across different sectors that have retraced most of the upside move of Thursday. The point is even if Nifty touches new highs above 8180 levels the number of stocks participating is less. This is a typical characteristic during 5th or c wave formation. So the wave personality is also hinting towards topping pattern rather than a strong momentum on upside from here atleast for now. We will keep a close tab on the overall breadth and sectors to further gauge the momentum as and when 8180 is broken on upside.

Nifty has continued to move as per the path first shown on 5th September 2014 and we continue to stick with this scenario as of now. Over short term, the up leg from the low of 7940 can be first leg of wave c but since the reaction was steep without any meaningful base formation so we can see a pull back towards 8050 – 8060 levels before the uptrend can continue. This pull back can be sharpas shown by past history and also seen during the bounce back of August & November 2013. On other hand if prices manage to take out the highs of 8180 it will resume the uptrend in form of wave c of second correction.


In short, there is possibility of short term pull back towards 8050 – 8060 levels before the up move can resume. Nevertheless, break above 8180 will continue the current uptrend but should be with lesser momentum and number of stocks participating can eventually reduce!

To subscribe to daily research on Nifty and 3 different stocks visit http://www.wavesstrategy.com/index.php/store.html

Thursday, September 18, 2014

Nifty path ahead - Why is it important to combine Elliott wave with Time cycles?

Many analysts or traders believe it is better to keep the techniques simple and easy to apply.
But the problem is when markets are moving in complex structure and with sharp reversals it becomes important to combine the advanced concepts together with basic techniques to get high probability trade setups. The movement shown on below chart is an answer to the critics of technical analysis that believes the study produces random effect. See yourself the below chart of Nifty that was published on 5th September 2014 that clearly showed the path we expect prices to follow.
Nifty daily chart published on 05th September 2014 in morning research report
 Happened as of today:
On 5th September 2014 following was published in the morning research report:
On daily chart, we are showing a probable path for next few weeks on Nifty. This is indicating that the overall trend can remain sideways to positive. One minor push on upside from here will complete wave a of second correction. Post which we can see downside pressure for 2 weekstowards 7980 level and then the final leg on upside in form of ……. will be completing a very important pattern. This is a tentative path and more price action from here on will provide further validity. For now, use crucial levels mentioned below from trading perspective.
Happened: Nifty moved exactly as per the trend shown. The magnitude of correction was overshot two days back but it has still been on track with the minor arrows shown on daily chart. For a trader touching the exact levels should be secondary but knowing the important turning areas with respect to time and when to avoid taking a wrong trade is very important! Novice traders probably wait for the exact level to be touched rather than focusing on the overall trend scenario and understanding the maturity of movement.
Elliott wave with time cycles solves many of the mysteries of price movement and equip you with the tool to forecast the markets irrespective of the news or major events!
To see what we expect next from here and if the final trend on upside has started with such sharp reversal or this is just a trap Subscribe NOW to “The Financial Waves short term update”!!!
Attend the 2 days training workshop on Advanced Elliott wave - Neo wave and Hurst Time cycles. In this training we are going to discuss about the important tools that helped us to predict the movements as shown above in the daily chart and why we are of view that markets are approaching the ultimate crucial levels very soon! For more details Contact on +91 22 28831358 / +91 9920422202 or write to helpdesk@wavesstrategy.com.

Wednesday, September 17, 2014

Why is Bank Nifty headed towards 40,000 by 2019!

Yes, We expect Bank Nifty to touch nearly 40000 levels over the period of next 5 years.
Now this figure might look irrational at the face of it but we have history in our favor that shows much better returns over the period of past 30 years. Sensex base value was mere 100 when it was launched and touched near 21000 level in 2008 in just 3 decades an increase of nearly 210 times. In the financial world one should have an open mind to look beyond bias with complete objectivity and belief in the techniques that has proven track record in the past.
Elliott wave is one of the advance methods of technical analysis that we exhaustively use to predict the future trend and along with it we do combined Time cycles that provides us rough estimate on the probable time frame by when we can expect the levels to reach. Advanced Elliott wave concepts also emphasis a lot on the use of Channels, without which the study would be incomplete.
Let us see a few of the studies we have applied on Bank Nifty that was published in our Monthly research report “The Financial Waves monthly update”
Figure 5: Bank Nifty monthly chart
(a few counts are removed from above charts)
Bank Nifty detailed analysis:
As shown on Bank Nifty monthly chart, in the month of May 2014 Bank Nifty took out the crucial hurdle of 13350 and entered into unchartered territory and after that prices continued the upward journey which is increasing the odds that Bank Nifty has completed wave C of wave [Z] of wave IV. This is indicating that Bank Nifty has already started the Bull trend in the form of wave V. However, similar to that of Nifty, post October we are expecting this index to …………..
Time Cycle of 33 months is currently due which is bottoming cycle. Already Bank Nifty has rallied 60% from the lows or from where wave IV has completed nearly 10000 to current levels of 16000.Hence we cannot rule out the possibility of correction which might pause the current up move but bigger trend has now turned to positive.
In short, we have forecasted the probable path of Bank Nifty in monthly chart. On downside12500 – 13000 is the strong support zone where 300 periods moving average is also placed. So over short term as indicated by ratio chart outperformance of Bank Nifty can continue. PostOctober 2014, ……….
To know more about the medium to long term direction of Bank Nifty along with Nifty and ratio analysis subscribe to “The Financial Waves Monthly update” by visiting http://www.wavesstrategy.com/index.php/store.html
Announcement 
Training Workshop in Mumbai
Attend the 2 days training workshop that will provide in-depth analysis on Advanced concepts of Elliott wave – Neo wave and how it can be combined with Time cycles.This is one of the most advanced training in technical analysis. It focuses not only on Price but also on Time which is an important element for any trader or investor. There are no shortcuts to Trade or Invest profitably. It comes with lot of research, psychology, objectivity, tested methods. 
Making money is one thing but to preserve what is made is the Key to trading success!!!

Thursday, September 11, 2014

Most Advanced Technical analysis training EVER – NEO wave combined with Hurst Time Cycles!

Time is the essence for everything. It is not only applicable to our day to day life but for freely traded markets as well. 
A good trade setup if not timed properly can still result into a serious loss. There are very few technical analysis studies that focus on Time since most of the techniques are driven by Price alone!
Technical Analysis in simple terms we can say that it is a method that helps us to evaluate the sentiments of crowd which reflects their behavior through buying and selling. Humans behave in predictable manner and it is recurring in nature. This can be seen in freely traded financial markets. There are certain patterns that markets form repeatedly. Objective techniques help to gauge the trend and to stay ahead of the news.
Let us see below the applied techniques of Neo wave and Hurst Time cycles
Nifty daily chart (Applying Neo wave and Hurst Time cycles) 
Nifty daily chart (Happened on 10th September 2014)
Elliott wave principle we believe is working very well in freely traded markets. It is developed by R.N Elliott in 1930. He has certain rules to identify the waves. But there are times when multiple scenarios are running and one get confused what action he should take next.
It is rightly said that one should always upgrade his knowledge to be better and adopt new things when your surrounding has changed. Similar theory applies to the techniques of freely traded market because it is traded by human beings who are driven by emotions such as greed, fear.Neo wave is advanced concept of Elliott wave and it is developed by Glenn Neely. In current situation this technique helps to understand the most probable scenario so that trading strategy can be accordingly formulated.
Advanced Elliott wave concept - Neo wave focuses not only on price but to an extent on time as well. But for trading, for high precision timing we need to apply Time cycles as an independent technique.  Time cycles provide the second essential confirmation. J.M Hurst time cycles is a new way to look at time cycles. Combination of price and time gives high successful trade set-ups. 
Attend the 2 days training workshop that will provide in-depth analysis on Advanced concepts of Elliott wave – Neo wave and how it can be combined with Time cycles. This is one of the most advanced training in technical analysis. It focuses not only on Price but also on Time which is an important element for any trader or investor. There are no shortcuts to Trade or Invest profitably. It comes with lot of research, psychology, objectivity, tested methods. The above study ensures increasing the probability of success while trading and also highlights the area when one should be patient and avoid taking positions. Making money is one thing but to preserve what is made is the Key to trading success!!!
Register before 15th September 2014 to avail Early Bird Offer and confirm your seat today! For registration call us on +91 22 28831358 / +91 9920422202 or write to us at helpdesk@wavesstrategy.com      

Wednesday, September 10, 2014

Neo wave - How to identify an impulse pattern and confirming its completion?

United Spirits has been in news post the debacle of Kingfisher airlines. We are not analyzing the correlation or impact of Kingfisher going to have on United Spirits stock price.
Over here we are going to analyze the independent price movement of United Spirits irrespective of the news going around.
The most important technique we apply is Advanced concept of price and time using Neo wave – Advanced Elliott wave.
One of the important technique to catch a reversal is to look at Price and Time reversal confirmation given by Neo wave
Let us now analyze below chart (published in today’s morning research report with short term charts)
United Spirits (McDowells) Weekly Chart:
Wave Analysis:
As shown in daily chart of United Spirits, since mid 2012 exponential rise from 500 to 2950 was witnessed. As per Elliott wave perspective, this up move is clearly divided in 5 waves. From the mid 2013 prices were trading in vth wave which has formed wedge pattern. Recently stock has broken down from the wedge pattern which suggests that up move from 500 to 2950 is complete and correction on downside has started.
1st stage confirmation:Advanced Elliott wave concepts suggests that break of the 2-4 trendlineor b-d trendline (in case of wedge) in faster time than wave 5 or wave e (wedge) took to form will provide 1st negative confirmation. In above chart we can see that b-d trendline is broken in less number of days that wave e took to form thereby confirming that the trend is reversing.
2nd stage confirmation:If wave 5 or wave e (wedge) is retraced in faster time than it took to form it will further confirm that the impulse up move is over and correction has started. Wave e shown above is completely retraced in faster time which further virtually confirms the reversal has happened.
This is a very important concept of Advanced Elliott wave –Neo wave that increases the probability drastically in favor that the corrective mode might have started. However, it is important to look at short term charts as well and the post pattern implication that gives the downside target which is explained in our short term daily research report “The Financial Waves short term update”. To know more about this stock, Nifty and where Indian markets are headed subscribe by visiting the Pricing Page.
Attend the 2 days training workshop on most Advanced Technical analysis training ever in Mumbai scheduled on 11th and 12th of October. This training session will cover the above mentioned technique and how we apply it practically on charts to trade profitably when probability of success is higher! For more details on training program contact us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / + 91 9920422202

Monday, September 8, 2014

Nifty: Hurst Time Cycles and why we think it is extremely important to apply with Elliott wave!

Nifty: Hurst Time Cycles and why we think November 2014 to March 2015 can be a period of accelerated selling!

Indian markets have continued to inch higher everyday and has crossed above the psychological level of 8000! Crossing of psychological levels can create euphoria as the news will be all over the place across media and retailers might get carried away exactly at the wrong time. We are not saying this rally is ending right now but it is important to adopt stringent risk and money management strategies since the current up move is in matured stage.

This time we are using a different concept – Hurst Time cycles to highlight why we think that the fuel is running out.  Nevertheless, please understand the short term trend for now is positive and detailed analysis is given in our short term update daily research. However, from Investment perspective this is not the ideal time and November 2014 to March 2015 can be a period of accelerated selling!

Let us look at below chart and the explanation on why October month can be important topping process!

Figure 1: Nifty weekly chart: 

Hurst Time cycles: J. M. Hurst was an aeronautical engineer who applied the advanced concepts of physics and cycles to stock markets. He had scientific approach to cycles and came out with conclusion that there are certain standard cycles that freely traded markets follow irrespective of their demographics or asset class.

Understanding Nominality: A few standard cycles that tend to work across are 54 months (230 weeks), 18 months (80 weeks), 9 months (40 weeks), 20 weeks and 10 weeks. Going on lower degree scale there are again a predefined set of cycles that can be applied right from daily to intraday charts. These are nominal set of cycles.

Understanding Harmonicity: Cycles are harmonious in nature and are normally governed by the factor of 2 except the 54 Months cycle which is harmonious by factor of 3. This means that as 54 months cycle exists there is 54/3 = 18 months cycle, 18/2 = 9 months cycle. So 54,18 and 9 months become important set of predefined cycles.

Understanding Synchornicity: This concept of cycle science indicates that cycle lows are synchronous in nature. It means that if the larger cycle is forming a low then the smaller cycle by default forms a low at that point. So a 54 months cycle low will result into lows of 18 months, 9 months and so on.

The above 3 concepts are the building blocks of cycle theory and makes it very easy for a cycle analyst to predict important turning junctures.

Let us now move on to applying these techniques to Nifty chart and see the important information we get using this Advanced Cycle concepts!

The chart shows 5 important cycles derived from the nominal set of 230 W, 80 W, 40 W, 20 W and 10 W (W – weeks). To start with we are assuming October 2008 as the major low. The actual cycle close to this nominal set is 252 weeks that we have applied. So if 252 W cycle has bottomed in Oct 2008 then all the lower cycles should have bottomed exactly at same time. The different vertical lines on chart represent different cycle lengths and at the bottom the cycle lows are also marked with stars for easy reference. So a star marked against 230 w cycle shows a low formed there. This cycle then bottomed out in August 2013 and both of the times we have seen strong multifold increase in prices post the cycle bottom. The next low of 252 W cycle is now in 2018 which can be year of major bottom.

The cycles that are most important to us are 84 W (nominal cycle 80 W) and 41 W (nominal cycle 40 W) that determines the medium term trend. As per 84 weeks cycle prices are now in the second half of cycle which is associated with topping formation. 75% of the cycle completion is the area of maximum downside acceleration which is coming in November 2014. By December 2014, 41 weeks cycle will also enter into its 75% completion stage and this can put pressure increasing the downside speed. Both of these cycles have bottoming period in April 2015. Post that, we can expect uptrend to resume. So as per, Hurst Time Cycle analysis we get a window of November 2014 to March 2015 which can be period of downside correction and an important low can be formed in April 2015.  This gives us fair idea with respect to time.

Please remember the drawback of cycles is that it has high predictability during important lows but topping process can be time consuming and challenging to predict. The best possible probability looking at the various cycles is that October can be the month where a medium term top can be formed and November 2014 to March 2015 can be a period of accelerated selling. So September can still continue the uptrend for now as long as important supports are not broken. We have so far talked about Time but it is apparent to look at price as well and the pattern that will be in sync with the forecasted time element.

Neo wave running Triangle pattern: Here we are showing a running triangle possibility using the Advanced concepts of Elliott wave – Neo wave. As per this theory all the legs are corrective in nature. Even the rally from the lows of August 2013 is part of correction. Corrective waves not necessarily end below the previous up wave but can end above the high of previous up leg. We call such corrections as running since the correction does not produce any price retracement. Currently, wave [D] is on going on upside for the target near 8270 – 8300 based on projection of wave [B] equal to wave [D]. Please bear in mind that the upside projection is given based on Fibonacci level and should NOT be used as ultimate target since there are no price resistance. But looking at Time cycle this looks the most probable pattern and reversal area. To get better turning areas it is important to look at short term charts and patterns mentioned in the daily research report.

In a nutshell, for now, avoid catching a top as this rally can turn euphoric and prices can move beyond the given target zone which is only based on Fibonacci projection. The best probable path is shown on the chart. For medium term investment positions use 7600 as an ideal stop and it is better to be out if prices break below this level as the next leg on downside can then start that can take Nifty towards 6200 – 6300 support zone by April 2015. For now, stay in direction of the trend which is currently upside and follow trailing stop methods to get the most out of the current leg of euphoria!!!

Training Workshop in Mumbai
Attend the 2 days training workshop that will provide in-depth analysis on Advanced concepts of Elliott wave – Neo wave and how it can be combined with Time cycles. This is one of the most advanced training in technical analysis. It focuses not only on Price but also on Time which is an important element for any trader or investor. There are no shortcuts to Trade or Invest profitably. It comes with lot of research, psychology, objectivity, tested methods. The above study ensures increasing the probability of success while trading and also highlights the area when one should be patient and avoid taking positions. Making money is one thing but to preserve what is made is the Key to trading success!!!
For more details on Training on Neo wave – Advanced Elliott wave and combining it with Hurst Time cycles Contact Us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / +91 9920422202
Subscribe to the monthly research report “The Financial Waves Monthly update” and find out the exact month and the period which can result into crucial turning points and why it is not the right time to Invest!!! For subscription visit http://www.wavesstrategy.com/index.php/store.html


Friday, September 5, 2014

Article in BSE Forum: Change in dynamics of Indian Markets post September 2013

Change in Dynamics of Indian markets post September 2013! 

Below article was published in BSE Forum Magazine in their September Issue
The rally was initially attributed to the election expectations and is now in expectations that the growth should be back on track eventually with reduction in inflationary pressure.
From Investment perspective it is necessary to look at charts that help in analyzing the direction of trend.
Figure 1: Sensex Monthly chart
Indian equity markets showed strong outperformance against Global markets since August 2013. Indian markets continued its movement in the unchartered territory and Sensex crossed 26000 mark in July. The index continued to trade at new highs in June and formed another strong blue candle.
Figure 1 clearly shows 6 consecutive blue candlestick formations and all the bars have managed to close above the previous month’s low as well. As long as the monthly low remains intact the medium term trend as per bar technique will remain positive. An investor can use this simple concept of bar technique to stay in the trend as long as it continues. Looking at the candle at the end of the month and if the monthly bar manages to protect the lows of previous bar the trend will continue to be positive.
10 days Exponential Moving average: Another way to ride the trend is to use trend following method. As per this technique the uptrend will continue as long as prices stay above 10 period Exponential Moving average. This average has been very well respected so far. The current reading of this average is near 23000 level as shown on the chart.
Prices are now in 6th consecutive positive month. Using trend following system is best trading strategy rather to catch a top.
Sensex in terms of real money – GOLD!
Sensex in terms of INR does not represent how Indian markets have fared in terms of real money. Currency is printed by the country’s central bank, which is backed by bonds and other debt instruments and might not necessarily represent the correct value. It therefore becomes necessary to see how stock market has been doing in terms of real money which isGOLD.Sensex in terms of Gold shown below needs little explanation.
Figure 2: Sensex in GOLD daily chart
The above chart clearly represents that Indian markets topped out in November 2007 itself whereas the actual index shows a topping action in January 2008. Since then Sensex in Gold has been way below its life time highs and so are majority of the stocks. Even when actual Sensexrecently touched new highs but many stocks have still not taken out their previous highs. Many of you might agree with me that both Sensex and Nifty in terms of INR are not representing true picture of what has happened with broader market. But if you see the chart of Sensex in Goldyou can see the real movement of Indian markets. On upside the Sensex / Gold ratio is having the resistance at 1.10 and currently it is trading at 0.95. So, Indian equity markets should continue its outperformance for few more months. This ratio chart also shows that Equity markets are currently preferred for investments over Gold as the ratio is moving higher. 
Figure 3: USDINR Weekly chart spot
Indian currency has been trading relatively stable this year compared to euphoric and highly volatile movement in 2013. High volatility in currency can wipe out the profit margins of companies having Forex exposure. It is therefore important for central bank to take prudent steps in order to curb high volatility!
As shown in weekly chart, USDINR bounced from the crucial support zone of 58 in month of May 2014 which is the important channel support along with 61.8% retracement of the entire up move from 51.20 levels to the highs of near 69. The level of 51.20 was seen in October 2012 and this pair touched nearly 69 in August 2013. Indian currency along with many Asian currencies was then looked upon as near crisis similar to that seen in 1997. However, many were surprised on dramatic reversal from 69 but after the new RBI governor Mr. Rajan took over as RBI governor in September 2013 he has tweaked the policies in right direction to curb the volatility in the Indian currency pair.  
The importance of 61.8% Fibonacci retracementin the year of 2009 prices made a high at 52 and then corrected towards 44 levels by mid 2011. This downside correction exactly took support at 61.8% retracement of the prior up move from 39 to 52. After that we can see that USDINRstarted multiyear uptrend. The point here is to show the importance of 61.8% Fibonacciretracement. Even this time prices have respected 61.8% Fibonacci retracement level very well.USDINR bounced back from 58 levels in the month of May 2014 and moved higher till 60.50 levels. So, over short to medium term price action near 58 becomes very crucial.
RSI indication: in the entire uptrend that started from 39 to 69, RSI has moved very well in between 30 and 80 levels. We can see that whenever RSI arrived near 30 levels, it gave respect to the same and reversed on upside. Even recently when prices were trading near 58 levels, RSIwas moving at 30 levels and we got to see the up move of almost 2.00 whole points from the lower levels.
In short, 58 and 61.50 is the range for USDINR. A strong break above 62 can be a concern both for Import oriented companies and for RBI since as this psychological level of 62 is broken there can be again rush for buying of dollars to safeguard against sharp depreciation!
Brief Profile:
Ashish H. Kyal is the Founder of Waves Strategy Advisors Pvt. Ltd (www.wavesstrategy.com) He is a Chartered Market Technician (CMT). Ashish is an MBA and did his Bachelor of Engineering from Mumbai University. He is a member of Market Technicians Association (USA). He has vast experience in Capital markets and has worked with leading Investment Banks like Lehman Brothers, Nomura Holdings within Capital Markets division.
Ashish is a frequent speaker on business channels like CNBC TV 18, Zee Business. He is a regular columnist for Economic Times section of Navbharat Times, a leading newspaper in India. He has also been a guest speaker at host of management colleges & frequently speaks at financial seminars like National Institute of Bank Management (NIBM), Market Technicians Association (USA), etc.
Waves Strategy Advisors offer various services across Equity, Commodity, Global and Forex segment. Daily  research report, Intraday/ Positional advisory, Long term forecast on Global Markets an Training on Advanced Technical Analysis concepts like Elliott Wave, Time Cycles