Tuesday, March 11, 2014

Nifty: Why knowing Elliott wave characteristic important for path ahead?

Nifty: Why knowing Elliott wave characteristic important for path ahead?
Elliott wave principle has a logical explanation on the way impulse wave 1 should behave. 
It is the period where wave 1 moves up slowly and steadily amidst the persisting pessimism from the ongoing bear market prior to the start. This results into selling at every level but market ignores it and rises the wall of worry. Then wave 2 retraces wave 1 by 61.8% and unless index reaches middle of wave 3 the pessimism continues. On probability terms impulse waves are seen only 20% of the times and within this 80% of the times wave 3 will be extended. This means there is less than 4% probability that wave 1 will be extended.
The above shows the logical explanation why at times when Elliott Wave counts are not clear it is imperative to know the characteristic of rise and other sentiment indicators to gauge the ongoing structure.
The below chart is published along with Weekly, daily and alternative counts in today’s morning research of “The Financial Waves short term update” a daily research report covering Nifty and stocks. In today’s report we have shown exhaustive outlook on Bank Nifty index along with NSEMidcap index as well.
Nifty 60 mins chart:
Wave Analysis:
In previous update we mentioned that “For now, it is better to avoid catching a top in current rally which is so far different from preceding rallies as there is no negative divergence on hourly charts. Next level to watch is at 6450 and close above it will continue the trend in complex corrective fashion!”
Nifty opened near 6413 with mere 12 points Gap up but the momentum then continued throughout the day with heavyweights like BHELICICI Bank, Axis Bank, Reliance Industries, LT,DLF rising by more than 5%. This helped index to reach the unchartered territory of 6525 by closing hour. Such euphoric rise in Banking heavy wrights and Reliance Industries is a rare occurrence and I do not remember last time such move was seen. Reliance Industries rose by more than 5% in almost 5 years period.
Volumes: A typical start of new trend requires a period of accumulation. This was seen during the bottom formation of 2008 – 2009 when the volumes were way above normal and was seen before January 2012 more than 1000 points rally and then again was seen in August 2013 before the rally as shown on daily chart. The current rally infact from volume perspective ……..
Alternate Expanding Triangle: An expanding triangle is a very rare pattern with spikes seen near the end of each of the legs which creates strong euphoria near their completions and each of the leg is bigger than its prior leg.
Current possibilities:  In short, prices are now approaching the strong resistance trendline of the channel and so the zone of ………. will be important as shown on 1st daily chart. ….
Do not get carried away in 3 days of euphoric rise because the underlying technicals are stating otherwise. To know what is next from here and Is this multi-month breakout for next Bull trend? Subscribe now to “The Financial Waves short term update” and get insight into what we think the pattern Indian equity markets are forming by visiting the subscription page at http://www.wavesstrategy.com/index.php/store.html

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