Indian equity markets have been all over the places. For few days we see a very strong rise with BIG Gaps as if there is no tomorrow and the very next week we see consolidation movement in a narrow range. During this movement forget about the stocks, betting on which sector is going to outperform during the day can also be challenging.
Patience is the KEY: One need to change the technical indicators based on the market dynamics and scenario. During sideways action it is prudent to apply techniques like Bollinger Bands ® but if the trending move starts one should be quick enough to change the trading style and method.
It is easy for anyone to get carried away after the brief up move and probably entering the trade exactly at the wrong time. We have been brave enough to show the below path immediately after the sharp rise of nearly 150 points on Nifty seen on 31st October 2014 and warning about maturity of up move.
Nifty daily chart: showing Hurst Time cycles with Neo wave counts
Following is a part of the research published on 3rd November 2014,
Now the above chart highlights that prices are in second half of the 108 days cycle which means that this cycle is due for a top. The reason for still seeing an uptrend is that within this 108 days cycle the 54 days cycle made its low on 17th October and is now only 8 days old. An ideal top should be formed near 20 to 25 days of this cycle since 108 days top has already passed out. This gives a probable time frame as latest by third week of November for crucial top. The cycle top has shifted from October to November given the number of holidays we encountered in October and the entire calculation is based on trading days.
Based on the above techniques along with channels we continue to believe that the medium term trend is in matured stage. Existing longs should follow trailing stop method and now use Friday’s low at 8198 as stoploss.
So far Nifty has managed to protect the lows of 8198 we mentioned and the correction has been on sideways. The chart clearly highlighted it is time to be patient and also the up move is in matured stage. There are times when one also needs to understand when not to trade. It can be frustrating to get in the trend just to realize a boring non trending sideways action to start and the day you lose your patience market will move in favor. Each student of market goes through this phase but it is prudent to apply a few objective techniques that can be against our intuitive feeling to understand the short term direction and possibility of non trending move when your emotions are all high!!!
Case in point is: It is extremely important to be patient if you are already long but also understand when not to initiate fresh trades! The above chart clearly highlighted the possibility of correction after the sharp rise and usage of 8198 as trailing stop method for existing longs! We also mentioned why only a few stocks are participating in the rally and you might have also faced the problem of stock selection as the one you hold right now are not the part of new highs seen on Nifty! I am not a tarot card reader but do understand the psychology of traders and to an extent always striving to understand the rhythm of the Indian markets using the technical studies and Elliott wavemethods!
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