Tuesday, February 4, 2014

Elliott wave: Nifty moved below 5970 but reversed exactly as expected! Trend is still negative!

The below research is picked up from "The Financial Waves short term update" and was published today morning before equity markets opened. We did mention that a break of 5970 will turn many bearish exactly at wrong time! To subscribe this daily research report visit http://wavesstrategy.com/index.php/store.html

Bottom Line: Nifty continued to move lower and is approaching towards 5970 level which should be momentarily broken to trap fresh shorts at lower levels!

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that, “In a nutshell, short term consolidation cannot be ruled out but is not necessary. Move below 6040 will resume the downtrend and prices can travel towards 5970 levels which is crucial level on downside whereas any move above 6110 can lead to minor bounce back. On upside 6170 level can be utilized as trailing stop.”

Nifty had another Gap down opening of around 30 points and prices continued to drift lower throughout the day making a low of 5995. Yesterday’s fall was different from the previous ones in a way it was more of a steady decline and very less intraday volatility. Such systematic fall cannot mark an end to short term trend and before reversal we should see the struggling between bulls and bears. Looking at the individual stocks there is positive divergences but if the fall continues from here these divergences will not carry any value. We also think prices might break 5970 level this time atleast momentarily which might be a trap for traders initiating fresh shorts at lower levels based on break of important support. Nevertheless the trend is down with 6097 as important resistance level on upside.

As shown on 60 mins chart, prices are moving in a red downward sloping channel. We are showing one of the possible wave counts as corrective on downside with a-b-c-x-a-b-c and prices are currently in wave a of the 2nd corrective pattern. 5950 level on downside is where wave a will be equal to 61.8% of prior minor wave a. Break below 5950 will extend this wave a further on downside.

The high beta sectors showed minor bounce back on Friday but it was only short lived as expected and both Midcap and Smallcap sector again closed negative. Existing short positions from 6280 highs can now trail stop towards 6097 which is very important level on upside.

In short, our bias will be negative unless we see a move above 6097 level and we doubt if 5970 will provide any support this time. If a Gap down opening is closed instantly with sharp reversal on upside that will be first sign of reversal but unless that happen ride the trend as long as it lasts rather than catching a bottom!

Subscribe now to "The Financial Waves short term update" that shows Elliott wave counts along with other technical studies and 3 other stocks. In last week's report itself we mentioned that 5970 level will be broken this time. To know what is next from here after the 5th Gap is filled subscribe by visiting http://wavesstrategy.com/index.php/store.html and select "The financial Waves stu" The report will be sent on daily basis on the email id and can also be accessed under Client login section of website.

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