Tuesday, July 15, 2014

Nifty path ahead as per Elliott wave and Channels!

The below research was published on 14th July morning before equity markets opened. To susbcribe to this daily research report "The Financial Waves short term update" that has Nifty along with 3 other stocks with detailed Elliott wave counts and applied technical analysis visit http://www.wavesstrategy.com/index.php/store.html

Bottom Line: Nifty continued its downtrend even after better than expected Infosys results which failed to cheer the street!

Nifty daily chart:


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Nifty 60 mins chart:    
Pls note the below is as of 14th July morning research report:

Wave Analysis:

In previous update we mentioned that “In short, the roller coaster ride of yesterday produced intraday swings of nearly 545 points - enough to raise pressure of even the most conservative trader!!! For Nifty, there is no change in our outlook that the trend remains negative and existing shorts can now use 7700 level as stoploss.”

Nifty continued it’s down move even when the IT bellwether Infosys announced better than expected results. The stock was initially up by 4% but managed to close positive by mere 1%. Nifty touched high of 7625 during opening hour but soon the optimism fizzled out and index touched intraday low near 7450 levels.

We are showing the probable path index is going to follow till July end. As shown on daily chart, there is a short term bounce back possible. The fall of Friday on intraday basis was very tedious and taking lot of energy. Each minor leg on downside was reversed by intermittent buying and short term charts clearly reflects some loss of momentum. On contrary break of 7500 level should have pushed index directly towards 7450 levels without much buying interest but 15 mins chart showed frequent pullback even sub 7500 levels. The trend continues to be negative but one should not be surprised to see pullback again if prices reverses back above 7500 level.

The other concerning factor for the down move is the Put-Call parity. We are seeing constant deterioration in Put options value and at the money Put option of 7500 increased by merely 30 points when index fell by more than 100 points. There is absolute lack of interest in Put buying and this is concerning for the down move. This indicator has worked very well in the past and so cannot be completely ignored. These are the reasons why we expect the fall will probably lack intensity.

As shown on 60 mins chart, prices are moving down in red channel and as long as this channel is intact trend will be negative. However, wave c is now equal to wave a and there is a possibility of bounce back in form of wave x back towards 7600 once this c leg is over. The weekly bar has closed decisively negative and bounce back will be short lived. From trading perspective, it is better to be less leveraged and use bounce back towards higher levels as shorting opportunity rather than creating it on break of previous lows.

In short, the direction continues to be negative as long as prices do not close above 7500 levels. The path that Nifty can travel over next few weeks is as shown. Move above 7550 can result into a deeper retracement towards 7630 whereas any move below 7440 will continue the current downtrend but maybe slower than previously expected!  

In today's morning report itself we mentioned "The short term chart shows that the down move is in the form of a-b-c correction so far. A close above 7500 will indicate that wave c might be over and the up move in the form of wave x towards the channel resistance is possible. The reason for expecting a complex corrective structure involving x wave is that each of the legs of correction is perfectly channelized. Systematic fall with all points touching on channel leads to a complex correction. RSI is also showing some minor positive divergence that can lead to sideways to positive consolidation."

To get realtime updates and susbcribe to this daily research report "The Financial Waves short term update" that has Nifty along with 3 other stocks with detailed Elliott wave counts and applied technical analysis visit http://www.wavesstrategy.com/index.php/store.html

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