Wednesday, September 9, 2015

Nifty: Reversal from Channel, Positive Divergence and Neowave - 2 stage confirmation technique!

Nifty reversed back sharply and had a Gap up opening in today’s trading session. Nifty is up by more than 100 points and such sharp upside reversal might be surprise to many. But we have been constantly warning that the down move looks to be in matured stage and the participation was reducing. Infact the leaders during the fall were not contributing. All in all the downtrend of past week was not supported either by momentum and we clearly mentioned our apprehension as the reversal can be sharp and fast.

Today’s price action vindicated our stand and shows why the “Risk Reward” a very important technical parameter was not favorable for fresh shorts when pessimism was maximum!
Now have a look at the below daily chart of Nifty which clearly shows the most basic but very important concept of Channels:We have shown this channel in our daily research report “The Financial Waves short term update”published in morning before equity markets opened.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis: Following research is picked up from the “The Financial Waves short term update”

On 8th September morning research when Nifty closed previous day at 7558 we mentioned the following - Prices are currently in wave (v) which is forming an overlapping Ending diagonal pattern. Due to the overlapping nature we are seeing positive divergence not only on the hourly chart but also on the daily time frame. Also these divergences are visible across the sectors and stocks. Minute wave iv of this minor wave (v) is formed at yesterday’s high of 7705. For this count to remain valid minute wave v should remain smaller than wave iii. So the maximumallowable limit as per this scenario is towards 7500. Looking at series of positive divergence across the scale and channel support there is high possibility that 7500 will not be breached. Keep an eye on 7705 which is wave iv area and also prior bar high. Decisive close above this level is necessary for any short term positivity.”

Nifty indeed protected the level of 7500 on downside which was the maximum allowable limit as per wave v target and moved sharply higher.

Neowave 2 stages confirmation: Nifty had minor Gap up opening near 7590 level but in the first hour itself prices took out the low of prior bar and made a low at 7539 levels. Post that due to lack of momentum on downside which we have been observing over past few days prices reversed back sharply and touched intraday high of 7720 levels. This movement also took out the high of 7705 of previous bar on intraday basis.
As per Neo Wave logics faster retracement above the ii –iv trendline followed by complete retracement of wave v virtually confirms that the ongoing pattern is complete and the low is in place. By breaking above 7705 Nifty provided 2 stage confirmation on Tuesday morning itself.

In a nutshell, all of the above techniques helped us to be against the crowd again at important low and before we have been able to capture the down move from 8400 as well when majority were extremely optimistic.

Subscribe NOW to “The Financial Waves short term update” and get insights into these objective ways of trading Nifty and stocks rather than getting carried away in extreme pessimism exactly when Nifty was at important channel support with strong positive divergence across the time frame and provided two stage confirmations as per Advanced Elliott wave techniques! For subscription option visit Pricing Page or Contact US.

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