The below research is published in "The Financial Waves Short term update" by Waves Strategy Advisors. This reserach report has Nifty along with 3 different stocks and Elliott wave counts. For subscription options visit http://wavesstrategy.com/index.php/store.html
Bottom Line: Nifty continued to move higher and tested previous important top but so far it has been on slower momentum!
Nifty daily chart:
Nifty 60 mins chart:
In previous update we mentioned that, “…In short, on upside high made near 6250 followed by 6300 will be extremely important on closing basis. A strong close above 6300 will force us to adopt alternative bullish possibility and a probable upside breakout from the consolidation of 6 years correction.”
We have been bullish on Nifty all the way from 5800 to 6200 and we have also mentioned about the importance of the current trading zone which it has touched many times before as well. A decisive breakout above the previous highs will indicate start of next trend on upside. But we have changed our short term stand to negative few days back based on the fact that the up move has been associated with slower and slower momentum. Also prices broke the important channel support by moving below 6120 thereby indicating that the short term up move is lacking conviction and would rather fail one more time before managing to make new highs.
Volumes have also gone down from the peak value which was last seen in August with upside volumes spikes were registered on 19th and 20th September and since then it has been constantly reducing. We should have strong volumes at current levels to indicate accumulation even at higher levels for Nifty to make new highs.
Daily RSI has failed to move above 70 so far. It is again close to this range but has exhibited negative divergence. A turn down in prices from here will create one more negative divergence on daily scale. On shorter time frame, a closer look reveals that each of the important highs at 5920, 6140, 6156, 6252 and 6269 has been made with RSI reading of 84.50, 80.20, 75, 62.50, 66. This clearly shows that momentum indicators are not supporting the up move. This is visible on above 60 mins chart.
Such movement and waning out of momentum was last seen during the uptrend of January 2013 when markets made a peak of 6114 and then reversed for next 2 to 3 months.
From wave perspective, since no part of wave C except in wedge pattern can break the 0-B trendline we have redrawn this trendline to accommodate for the spike down seen 2 days back. Also actual wave “a” started from 5320 and not 5118 so the actual 0-b trendline is shown above which is still intact as of now.
If the current move has been a 3rd wave up and not c then we should not have so many technical reasons mentioned above against the 3rd wave and momentum should pick up in 3rd waves which is actually slowing down and is a typical property of wave c.
On one lower degree we have tweaked short term counts to accommodate possible extension seen in wave c. At the high of 6270, wave v= wave i and also entire wave c is exactly equal to wave a.
Given all these technical factors, we have to wait for prices to close below the previous day’s low for minor negative confirmation and a move below Tuesday’s low of 6079 will be extremely crucial. Markets normally do not move up with so much of negative indication but nevertheless these indicators will start turning on upside and remove negative divergences if Nifty closes above 6300 where we will be forced to adopt bullish alternatives which looks lower probable as of now.
In short, the uptrend looks on lack of strength and momentum so far and 6300 will be extremely important level. Move below 6210 followed by break of 6080 is required for start of negative trend atleast towards 5800.
The above research was published in today's morning report by Waves Strategy Advisors. For subscription option visit http://wavesstrategy.com/index.php/store.html or write to email@example.com or call us at +91 9920422202 / +91 22 28831358