Friday, April 20, 2012

Waves Strategy Advisors: Nifty continues to test patience and move sideways!

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Bottom Line: Nifty continues to have lackluster session with no directional breakout. A close above 5380 is necessary for directional movement.

Nifty Daily chart:

Nifty 60 mins chart:

 Waves Analysis:

We mentioned in our previous update, “Yesterday’s low at 5290 should be maintained if prices have to move higher. A break below 5290 will indicate sideways action will continue for few more days. Sideways or Triangle patterns are most difficult to trade. This pattern tests the patience of traders and ensures most of the traders are out of the market exactly at the time when trend is about to start. Predicting the exact day for the end of sideways correction is anyone’s guess but Time cycles are suggesting an up move can start within few days. However price confirmation is very important and a move above 5380 will confirm this bullish scenario. Any break below 5290 followed by 5250 will be bearish.” BANG ON!!!

Prices failed to move above 5340 level on Friday and continued to trade in sideways action during first half of the day. As soon as 5290 level was broken Nifty spot touched 5245 and bounced back from there closing the day at 5290. We have been very accurate in mentioning these levels as important. There has been some freaky trade on Friday wherein Nifty futures made a low of 5000 with huge volumes and Infosys made a low of 1950. This kind of trades can be due to algorithmic trading or wrong orders or technical glitch. It is anyone’s guess what caused the trade. But these things do happen in markets and the recent best example is US flash crash which happened on 6th May 2010 wherein Dow Jones Industrial Average plunged about 1000 points—or about nine percent—only to recover those losses within minutes. Mutual fund selling and High frequency traders are being blamed for such an event but there is no 100% surety on the cascading effect that resulted into the crash.

The case in point is even a freak trade made Nifty futures and Infosys touch insane levels but Nifty spot moved exactly between the range we expected. Prices behave in systematic predictable fashion and Elliott waves along with Time cycles and basic technical tools help us to forecast most probable future price path.

For now, sideways action can continue unless we see a move above 5350 followed by 5380 levels. A move above 5380 will increase the odds that downside correction since the high made on 22nd February 2012 has ended and next leg C up has now probably started which will give good trending move. A break below 5250 will take prices towards 5200. Wait for crucial levels to be taken out to avoid getting financially and emotionally drained out by trying to catch reversal points!

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