Wednesday, December 17, 2014

Nifty: How applying Time cycles, Indicators and Elliott wave helped us capture the top?

In our monthly research report “The Financial Waves Monthly update” we have warned our subscribers exactly at the time it was needed most. 
It takes lot of courage and belief in the techniques you follow to stand against the crowd when the euphoria is at its peak.
Go ahead and read below the various different techniques we applied that all pointed out that the uptrend in Indian equity markets and Nifty was a “risky affair”and not worth the drawdown which might happen…
Figure 1:Nifty weekly chart
Following is a part of research report published in our “The Financial Waves short term update”Read yourself why we turned bearish at the time when the majority had been bullish exactly at wrong time!
Indian markets have continued to touch new highs in the month of November. The high made in November was at 8617 and December also started on positive note with prices touching 8627 on 4thDecember. November was more of an upside drifting movement with the trending move not lasting for more than two days even on upside. There has been lot of euphoria being created every time prices touches new highs but it is crucial to also acknowledge the fact that everytime a new high istouched the broader market has failed to confirm.
Advance Decline line:The best indicator to measure how the broader market has been performing is the Advance decline line. (shown in actual research report) above shows the red line which is the AD line. It has been constantly forming lower highs and lower lows and in November as well there has been a sharp down move.  AD line touched the level of -2000 which was previously seen in mid of May. So this up move which has been on lot of euphoria and optimism is not supported by the broader market.
Figure 1 shows Nifty weekly chart along with 84 weeks Time cycles.This cycle is a part of Hurst cycle itself shown previously but only on a broader frame. Any correction can either happen in sideways formation or downside (assuming prior trend is on upside). The correction seen from in 2008 was sharply on downside and the low was formed near the cycle low date. The next correction was in sideways formation as prices simply oscillated within a range from October 2009 to May 2010. The next set of correction in 2011 was again on downside followed by sideways correction in 2013. If the pattern of alternate type of correction between sideways to downside is valid and still working then we should indeed see a downside correction going forward.
Monthly Bar technique: Now let us look at the Monthly bar technique to understand the crucial support zones. …..
Commodity crisis: The current research is focusing on the commodity markets and global commodity stocks given the fact that this time the risk has drastically increased for companies or stocks that trade in commodities and even for commodity producing countries. A sharp rise or fall results into eventualities that are difficult to predict beforehand and looks obvious in hindsight. Sharp fall in Crude Oil prices along with commodity producing companies worldwide is hinting towards the increased risk in this asset class. A strong trend will ignore the actions of government or decision makers and we have seen the example of 2008. If Crude prices continue to strongly trend on downside, even the output cut by OPEC will be futile in changing the trend of commodity which will then put lot of pressure on companies directly or indirectly linked with production or refinement of Crude oil.
In a nutshell, looking at the overall breadth, momentum and sector participation we continue to look at the current uptrend as a risky affair
In our short term research report on 8th December 2014In short, Indian markets continue to trade at crucial levels and a trending move is due now. It is better to await either a close below 8500 followed by 8430 or above 8627 which is the spike high for confirming the direction of trend.Indicators and other methods have been showing absolute loss of momentum but it is prudent to wait for prices to confirm which it should in this week!
In our short term research report on 9th December 2014In short, lower highs lower lows formation on short term chart, bar technique and Elliott wave theory suggest weakness to prevail in Nifty. On upside as long as 8590 followed by 8627 is intact trend will remain bearish. Close below 8430-8420 levels will be important to continue downside correction.
So if anyone have doubts whether the current fall was predictable amidst the optimism and euphoria using objective techniques the above research reports are much more than the evidence to prove the validity of technical studies and Elliott wave theory we have been following!
Nifty has broken below all important supports but is this right time to enter fresh short positions? We do not think so as Risk – Reward is not favorable. So what should be Trading or Investment strategy?
Subscribe to the Monthly and Short term research reports “The Financial Waves” and get detailed insight into the crucial levels along with Elliott wave counts, applied technical studies and much more, Speak with our research desk for any doubts! I am conducting a 2 days online training course on Elliott wave and will discuss various methods used for catching the recent top. To attend the training get in touch with us at or call on +91 22 28831358 / +91 9920422202. Visit

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