Friday, August 26, 2016

Why Moving averages are the keys to successful trading?

In Technical analysis, Moving average is one of the simplest and ideal to way to identify the trend. In most of the books of technical analysis, importance is given to 200 days moving average. For instance, if stock is trading above 200 days MA then trend is positive and vice versa. But, we differ from this stand as it is not all charts or asset class that follows the 200 days MA. Thus it is important to identify which moving average is suiting that particular stock. It is like when you go to the shop to buy cloths. Person will buy that cloth which suits him in size, color, etc. Same is the case with moving average as different stocks follow different averages. Below we have shown chart of Yes Bank taken from The Financial Waves Short Term Update.

Yes Bank weekly chart:

The concept of moving average is simple but it is not only for short term trading. It is also useful for medium term investments. Above we have shown chart of Yes Bank which has doubled now from the low made in the start of 2016.  This stock is brilliantly following 5 weeks Exponential moving average. Not a single time prices have given close below 5 weeks EMA since the low made at 650 level in the start of 2016. Prices have maintained its uptrend irrespective of quarterly results or Global market volatility. Isn't it interesting?

Technical analysis is vast subject and therefore it is important to understand the different concepts and post that one should form trading or investment strategy. To know the in-depth research on Nifty and 3 stocks on daily basis, subscribe to The Financial Waves Short Term Update and for subscription visit Pricing Page

Wednesday, August 24, 2016

Nifty inverted scale- What to expect next?

Stock tips and trading on Nifty can be challenging in sideways market. Below shows how charts can be looked differently.

Below is the Nifty 60 mins chart. At first instance one may get surprise as this shows that prices are in downtrend from last few months. However this is not true and we have shown Nifty on inverted scale. Inverted scale means totally the opposite image of the original chart. The reason behind showing this in The Financial Waves Short Term Update is to analyze the chart without any bias. The range bound action of last one month has resulted in to more confusion among trader and investors. During such scenario inverted scale chart can provide some hints towards next trend. One should always use price confirmation techniques to confirm the trend. Below research we have taken from the report published in the morning of 23rd August 2016.   

Nifty Inverted chart: 60 mins

(part of research taken from 23rd August 2016)

Wave analysis:

Nifty had a positive opening but prices drifted lower in the opening hour itself and touched intraday low of 8614 during later part of the day. Movement was absolutely sideways within the narrow band of 8650 and 8620 for most part of the day. Such narrow movement for many days has turned the environment dull and lackluster. Picking up stocks during such conditions is also not easy. Stocks like Voltas, Petronet LNG, Cairn India that were showing strong momentum suddenly reversed with a loss of nearly 3%. This suggests that stock picking can be challenging.

Nifty 60 mins on inverted scale, as we tend to look at patterns differently during a downtrend. As per this chart, Nifty is intact in downward moving channel from last few months. However from the start of August 2016 momentum on downside is not building and there is probable formation of Ending Diagonal Pattern which suggests that trend may be at the matured stage. Again look at the scale which is inverted. Apart from that, 194 hours Time Cycle is working well to capture important reversals. Prices are now close to the same cycle and hence action becomes crucial of next few days. So whether it’s inverted or normal chart, we can see that signs of maturity exhibits on both these charts. This is the ideal way to look at the market without any bias. Nevertheless use of price confirmation is most important to confirm the scenario which we will get only…...

There are many ways to analyze the market and maintaining the objectivity is must while trading. Hence one should be prepared for the next trend with key reversal areas which can guide for the breakout. To know the in-depth research on Nifty with medium term as well as short term Elliott wave counts and 3 stocks, subscribe to “The Financial Waves Short Term Update” Subscribe Now by visiting Pricing Page

Monday, August 22, 2016

Post Olympics what to expect from Brazil!

Olympic Games Rio 2016 comes to an end with US, UK, China at the top rank of the table and India managing to get 2 medals – definitely a proud moment for the country.

It is said and believed that Olympics results into lot of economic activity around the country and helps in stimulating country’s economic growth led by tourism and other technological development to manage the entire event.

Let us try to look at Brazilian equity market and see if the event indeed resulted into a stand apart movement on stock market or the overall movement has continued as per the ongoing trend for many years.

Below chart of Bovespa (Brazil) was published in our monthly research report on 6th August 2016. This clearly represents that irrespective of the event the stock market has continued to move within the blue channel and prices reversed on upside in early 2016 which coincided with lows formed in a few of the Emerging equity markets like India.

So was it really Olympics that helped Brazilian stock market in 2016? It seems more like a coincidence to me!

Figure 5: Bovespa (Brazil) weekly chart

Below is part of the research from “The Financial Waves Monthly update”

Brazil stock market index - BOVESPA  shows that after forming a top in early 2008 this index has still failed to cross above that highs and has corrected substantially. Later after topping out in late 2010, this index has continued to move in downward sloping blue channel and has now arrived near the resistance. It will be crucial to see if the same can be broken this time or prices again reverse back on downside. Brazil had not been preferred destination and the correction that started in 2008 is still ongoing.

Out of the BRIC nations it seems only Indian markets have lived upto the expectations to some extent post 2008 and rest other nations have failed miserably. This is another reason why we think the ………..

Olympic Games Rio 2016 now comes to an end. Let us see if the blue channel that has worked so well for Bovespa continues to act as resistance irrespective of the event!

“The Financial Waves short term update” and “The Financial Waves Monthly update” provides indepth research using technical analysis concepts like Elliott wave, Time cycle analysis, Indicators – RSI, Channels and lot more. Get access to these reports along with detailed Elliott wave charts and analysis on Nifty, Bank Nifty, stocks and Global markets. Visit Pricing page for subscription options or Contact US on helpdesk@wavesstrategy.com or on +91 22 28831358 / +91 9920422202 for any queries.


Tuesday, August 16, 2016

How to trade Nifty using RSI and Channeling techniques?

Below article highlights Trading using technical analysis methods like RSI and Channels and its application on Nifty.

It has been many weeks since Nifty is trading in a range of 8500 and 8750 levels. It was more than a month back on 13th July when Nifty crossed 8500 levels in this rally and it has failed to show any strong trending move post that. Stock specific action has continued during this period. The structure looks like an expanding pattern with wave …….. currently ongoing. This pattern is very similar to that seen during the 2014 - 2015 rally in expansion before finally topping out in March 2015.

Now look at the below chart of Nifty that shows application of multiple channels along with RSI:

Nifty 60 mins chart:

Application of Relative Strength Index (RSI): measures the strength of an index or stock with respect to itself. Many confuses this simple indicator with that of relative comparative where we measure the strength of one asset or stock with that of other. RSI basically measures the momentum of the market and helps in providing earlier warning signal in case the ongoing trend is in danger. However, a lot of novice traders simply rely on overbought and oversold state of RSI to create positions which is a blunder if there is no price confirmation. Also overbought zone is not always defined at 80 but has to be derived from the earlier extreme levels seen on the chart for that time period.

During a range bound movement RSI works very well when combined with channeling technique. In the hourly chart, we can clearly see that RSI has been reversing from the zone of 30 and from 70 - 80 zone. At the same time prices are moving within the red channel and reverses exactly from its support and resistance. For now the trend is …… and the channel and RSI resistance is now near ………… levels. It will be important to see a decisive break above this channel for extending this rally further. Failure to see upside momentum above the zone might result into retest of the lower support line again.

The above research is picked up from the “The Financial Waves short term update” our main flagship product covering Nifty, Bank Nifty and stocks on rotational basis that shows application of various technical analysis methods along with Elliott wave. Indian markets are again reaching towards crucial juncture and we are expecting a strong trending move to emerge very soon. Know the key levels of support and resistance by subscribing to this research report NOW by simply visiting Pricing page

Friday, August 12, 2016

Nifty valuation Price to Earnings Ratio using technical analysis!

How to look at fundamental parameter like Price to Earnings Ratio (PE ratio) from technical analysis perspective?

Indian Equity Markets (Nifty) has continued to move in range from last few weeks. Markets were waiting for GST to pass out from many months which is finally cleared by Rajyasabha recently.

Many were expecting sharp rally post GST clearance however markets have been moving in range with important support intact on downside. Nifty is making new highs but not able to sustain the gains and reversing towards the short term pivot support levels. This is one of the examples that trading or investing based on news or events is dangerous and hence understanding market behavior applying various parameters is must. Below we have shown chart of Nifty and Price to Earnings ratio to see the valuations at current levels.  Apart from  this, we have also shown long term, medium term chart of Nifty with applied advanced concept of technical analysis which is shown in original report “The Financial Waves Monthly Update”.

Price to Earnings ratio chart

(Part of research taken from the monthly research report)

“Understanding the valuations: We take a step forward by looking at Price to Earnings ratio with a different perspective. In Figure 4 you can see comparison of Nifty with that of Price to Earnings chart. Nifty current PE stands close to 24. Previously, in March 2015 when Nifty touched all time high of 9119 the PE ratio was exactly at this level. Now when markets are at still lower levels from there the PE has already touched 2015 highs. This clearly suggests deterioration in the Earnings over the year. Also we would look at the overbought zone of the PE chart. The major tops formed in the year 2008, 2010, 2015 showed extreme PE readings and we have again approached at the same level.

We would refrain from using PE chart to call market tops as the irrational exuberance can last longer than anyone’s expectations. Nevertheless, this does provide perspective to the overall Elliott wave counts and pattern under development.” Detailed counts shown in actual research report.

The above is the part of research only. To know the pattern under formation on Nifty with advanced Elliott wave perspective, subscribe to “The Financial Waves Monthly Update” and for more information visit Pricing Page