Monday, May 18, 2015

Sensex impact of Rupee, MAT, Chinese IPO, fresh triggers awaited!

The below is the English transcript of article by Ashish Kyal, CMT Director of Waves Strategy Advisors in Economic Times section of Navbharat Times
Indian equity market has been struggling over past few weeks. Intraday volatility has increased given the news flow and data such as WPI figures, Industrial growth and worry about domestic demand pick up. Sensex managed to close at 27324 with some gains on Friday but has so far not taken out the upside resistance of 27600 which is important for short term positive confirmation. On downside low at 26400 is very important support. We can expect a range bound movement in current week and only a break above 27600 will resume the uptrend.

Midcap and Smallcap sectors: Selling seen over past few weeks was more prominent in Midcap and Smallcap sectors which have reached over valuation area. Pharma sector has also corrected sharply from the highs as a few of the stocks were demanding very high PE ratio which was not justified. Banking sector on the other hand has been consolidating within a range and fresh clues are awaited for future trend to emerge.

RBI steps will be crucial: WPI inflation data released last week has dropped to record low levels of -2.65%. This has raised expectations that RBI can start focusing on growth and cut the key policy rate in its upcoming monetary meeting to be held on June 2. RBI has cut interest rate twice this year and after the negative WPI figure and poor industrial growth, pressure will be build on them to take further positive steps which will be important for direction of interest sensitive stocks.

Indian Rupee: Indian Rupee had been under pressure over past few weeks and has touched the level above 64 against USD few days back. Further move above 64.50 will be a concern for RBI as Mr. Rajan has managed to reduce the volatility in Indian Rupee after taking over as governor. Move above 64.50 can trigger more USD demand thereby putting pressure on the economy.

Minimum Alternate tax (MAT): Uncertainty over MAT for years prior to April 2015 has made foreign investors nervous and has reduced confidence in existing government. Decision on MAT is going to be important to restore back confidence into Indian government and their reform policies.

China IPOs impact: Chinese equity market has been in news after as many as 20 companies have been planning to issue IPOs. It is believed that this will impact other emerging equity markets including India as Foreign institutions will probably move out of other equity markets and will start putting money in Chinese IPO that has given promising returns over past year.

Week ahead: Sensex has been moving sharply over past few days but within a range. This week the support is at 26400 and upside resistance at 27600. We can expect consolidation between this unless more clarity is obtained from the above fundamental data. From technical perspective prices have moved below 20 weeks Moving average which represents medium term direction. Investors should therefore remain cautious and wait for clear breakout!
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Wednesday, May 13, 2015

Nifty sharp reversals: Is it predictable using Technical analysis? Reading RSI indicator during corrections

Bottom Line: Nifty continued to move in an environment which is not conducive for positional trading. Wait for range to break for clear trending move to emerge!

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that In short, trading this upside correction can be challenging as the pattern of this up move is not clear so far and there is no higher high and higher low formation. Using the bar technique the trend is positive but give leeway as this up move can be interrupted by sharp reversals!

Nifty continued to move in a high volatile environment with no clear trending direction. We have been accurate in pointing out that the up move will be interrupted by sharp reversals which happened yesterday. After a strong move from 7997 to 8332 levels, Nifty gave away nearly 200 points of gain in just single day. Infact, this move happened on the very next day after a strong rally of 140 points just a day before. Such sharp reversals on either side makes the trading environment challenging. But this has to be expected after a good trending move especially when we think that medium term downtrend has started.

For a clear direction to emerge we have to see a decisive break either above 8335 or below 8000 levels. This is a big range but prices can oscillate within this. Today we can expect minor Gap up opening after a strong down move of yesterday to make it more difficult.

As highlighted earlier it is better to stay with the downtrend as the 108 days cycle has entered into the maximum acceleration zone. We are not going to buy in any rally unless and until the time cycle low is formed by third week of June.

As shown on hourly chart, currently wave x is ongoing which is internally subdividing into waves a-b-c. This can result into one minor push on upside back towards the trendline resistance at 8270 post which downtrend will resume. This minor push is not necessary.

In short, after a sharp up down move there is possibility that we can see some consolidation and range bound action before a trending move can emerge. Today we can expect a Gap up move after strong selloff seen yesterday. This probable path is as shown and any pull back on upside might not last for more than 2 days. Trade cautiously unless a clear trend emerges from here on.

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Friday, May 8, 2015

Nifty- Are we headed for a crash? Any pullback should be temporary!

Nifty video update on Elliott wave / Neo wave structure of Indian markets. Are we indeed headed for a crash and the risk has been increasing with each passing day..... For subscription to daily research reports visit Pricing page...Indian markets are at a very important juncture!

Wednesday, May 6, 2015

Nifty: Is Indian Equity markets headed for a CRASH!

Many might be still wondering and trying to figure out the logical reason for strong selloff in Indian equity markets over past few weeks. The intensity of the down move has been increasing and Nifty is down by more than 2% without any significant news or event. This is simply showing that every pullback is now temporary and the major trend has reversed from positive to negative. During such scenario when the movement is against the majority the only objective technique that remains tested for time is Advanced Elliott wave – Neo Wave along with Time cycles.

It is these studies that helped us to stay on the short side of the trend and constantly warn our subscribers about the impending turn in the overall trend. Now the big question is – Are we headed towards much lower levels from here or the down move is just temporary?

Let us look at a few concepts of Time cycles and Elliott wave to understand:

Nifty daily chart:

The above chart shows two important time cycles as per Hurst’s analysis – 54 days and 108 days cycle. The cycle reaches its maximum downside acceleration at the zone of 75% completion. 108 days cycle is now already at 73% completion so we are headed for the crash zone as per this cycle. Another cycle of 54 days is now heading towards 50% which is the topping area. So after next few days this cycle will also turn on downside. So as per cycle theory there is still lot of room on downside and today’s sharp down leg can just be its first leg of accelerated momentum.

As per Neo Wave – Advanced Elliott wave: we have completed a very important uptrend that started from the lows of 5118 in August 2013. This is for the first time that prices have also formed lower highs and lower lows which is classical confirmation as per DOW Theory as well.  We will not be able to reveal our downside targets from here as it is meant for paid subscribers but the hint is we use Fibonacci levels from the truncated areas to get exact target zone!

It is now always that the technical picture gets aligned all together very accurately. Such alignment happened weeks back and probably this is the time again where everything is hinting towards the same thing – A probable CRASH! However, do not get carried away and use prudent stoploss levels in case market decides to play out otherwise. Our short term research report along with long term monthly forecasts gives a complete view on Indian equity markets and stocks with utmost objective techniques.

Subscribe now to “The Financial Waves short term update” and get “The Financial waves monthly update” free for annual subscription. We do not want our readers to miss out on long term structure which is very important as the overall trend is changing. For subscription options visit the Pricing page.

Tuesday, April 28, 2015

Nifty: Applying Dow Theory along with Elliott wave for trend confirmation!

Dow theory is the building block of technical analysis.
This theory has helped technicians for decades to understand the major trend of the market / index or stocks. Many Elliotticians do the blunder of giving up the most basic and important technique which helps us to stay objective at times when the forecasting tool like Elliott wave might give a few other probable scenarios. A combination of both of this technique is a lethal tool one can use and imagine when you combine this along with time cycles and momentum indicators to time the market! Trust me it gives a thrilling experience.

One such experience we had while catching a top at 9119 and later near 8845 levels. We have our records that speaks for itself along with various technical studies that helped us to capture the important tops weeks before!

Bottom Line: Nifty closed below 200 days MA will now be the key point of discussion across media forgetting the fact that the reversal actually happened near 8845 and now indicators are in oversold state!

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that In short, Nifty has arrived at important juncture. Hourly close below 8250 will resume the downtrend with size of the bar will be important to observe whereas for any positivity move above 8370 will be necessary.

Nifty had a minor positive opening but prices entered into red territory immediately and selling pressure intensified during the day. The intraday movement has been overlapping but the overall trend will continue to be negative as long as prices do not take out the high of previous day which is at 8335 levels.

Yesterdays movement has taken out 200 days Simple Moving average which is a standard benchmark most of the analysts uses. As mentioned earlier a strong momentum below this average will further extend this current downtrend. Also now the bearish news will start floating across when the indicators have entered into oversold state and the fall of nearly 650 points has already happened. Case in point: It is better to use objective techniques mentioned above which helped us to capture the top near 8770 levels rather than getting carried away now with the news.

Nifty closed near the days low and the advanced decline ratio continued to be very poor with 215 advances against 1243 declines. There has been no bounce back in high beta sectors that was outperforming before and now shows drastic underperformance. So it is prudent to avoid catching a low and close above previous bar high will be first sign of reversal.

Prices have now taken out the previous rise in faster time and for the first time since August 2013 we are seeing very decisive lower highs and lower lows formation. This is the reason we are able to draw a clear downward sloping trend channel - the most basic and important concept of technical analysis that helps us to identify important trend changing scenarios over medium term. So it looks the overall market dynamics are changing from positive to negative and we have entered into sell on rallies strategy rather than buying on dips.

Over short term, as shown on 60 mins chart, the sharp rise towards 8505 was only wave x and the next set of downside correction has started. As long as the 8335 which is previous days high is intact the trend will remain negative. Nevertheless, the best of the downside move might be over as now we are approaching close to medium term channel support (shown on daily chart) which very few are looking at as the focus is shifted to 200 days MA. So the zone of 8020 to 8100 can be an important support area post which we should start seeing the upside retracement of the fall.

In a nutshell, faster move below previous low of 8270 confirms the reversal in medium term trend as per Advanced Elliott wave and as per basic and most important concept of technical analysis - DOW theory the upward trend started from 5118 in August 2013 is complete! Over short term use 8335 as trailing stop for short positions with important support now near 8020 8100 zone!

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