Tuesday, July 28, 2015

Nifty reversed and broke the wedge shaped pattern! Is this resumption of bigger degree downtrend?

Nifty topped out at the level of 8654 after rallying for 28 days from the lows of 7940 levels.
 Many would have come across the news and forecasts that prices are headed for much higher levels towards 9000++ during this up move. However, when Nifty crossed above 8600 we have been cautioning our subscribers about the lack of momentum and participation in the up move and that the uptrend is only going to be temporary with medium term trend on downside.

Yesterday’s selloff of more than 150 points simply reflected how vulnerable the entire up move had been!

Here is what was mentioned just few days before the fall:

Nifty 60 mins chart: showed on 24th July 2015 in daily research report “The Financial Waves short term update”

Happened as of 27th July 2015:

Elliott Wave analysis: below was published on 24th July 2015 morning before markets opened

In the last update we mentioned that, “In short, …..one should be ready to change the stand as and when prices shows strength or weakness. Sustainability above 8650 is required to see continuation of this up move whereas move below pivot low of 8500 will be bearish!”

Volumes: As shown on daily chart, volumes have been reducing in this entire rise and the 14 days Moving average of volume is drifting lower whereas during a down day the volumes are increasing. This is an indication of distribution rather than accumulation which is also in sync with the wave characteristic of b wave. Over medium term 8315 is now an important level to watch which is the swing low and also below 200 days Moving average.

Nifty hourly chart shows loss in momentum as prices made high above prior peak but RSI continued to deteriorate and made lower high. Also the steepness of the rally has been reducing with each leg getting smaller on upside from 7940 levels. As mentioned earlier the entire rise looks like a wedge shaped pattern and unless we see a strong move above the crucial resistance of 8730 we continue to look at this as wave b, post completion of which we should see wave c on downside.

From Price Time reversal perspective, we should see faster move below the last rising segment i.e. move below 8500 within two days is required to provide first negative confirmation that the up move is in danger….

The above research published on 24th July 2015 clearly indicated reduction in volume, momentum and the size of rally. The sharp selloff of 160 points shown on 2nd chart simply indicates how irrational the up move can make majority when the expectations of 9000 – 9500++ started building up exactly when Nifty was due to reverse.

The 2nd chart clearly highlights the severity of fall and the strong trending move in opposite direction.

If this is indeed completion of a wedge shaped pattern then we will have much lower levels over medium term. However, markets cannot move in straight line and minor upside interruptions are plausible which will only provide fresh opportunities to place on downside.

For more details along with Elliott wave technical justification on where the short to medium term trend is headed from here and the crucial levels on Nifty and stocks subscribe to “The Financial Waves short term update” This can be just the resumption of medium term downtrend and movement can be very fast. Stay alert! Subscribe NOW and get long term forecasts research report FREE. For more details Contact US on www.wavesstrategy.com or call us on +91 9920422202 or +91 22 28831358.

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