Nifty had continued to move with high degree of predictability even in the month of October irrespective of the overall events or news.
The below research is picked up from “The Financial Waves Monthly update” that shows the application of Neo wave – Advanced concept of Elliott wave and how knowing the pattern is most important fromTrading or Investment perspective.
Anticipated: Nifty daily chart – (published on 5th October 2015)
Below research is picked up from “The Financial Waves Monthly update” published on 5th October 2015
Anticipated: “Indian Equity markets behaved exactly as expected in the month of September as well. We have been able to forecasts the trend for Nifty very accurately over past many months now. This simply shows the power of pattern if identified correctly.
As shown in Figure 3, after the sharp selloff in last week of August and early September, majority of the market leaders indeed protected their lows and bounced back. We are seeing pullback in start of October and this can continue for few days to two weeks in the form of wave f of Diametric Pattern.
Extracting triangle pattern in wave e: There is a slight modification in the internal pattern of wave e of Diametric. This modification can be seen in Figure 4. As shown wave e itself formed an Extracting triangle pattern. This is as per Neo wave which is advanced concept of Elliott wave. In an Extracting triangle pattern the strength on downside reduces and that on upside increases. We can see that wave (e) < wave (c) < wave (a), each of the downside legs were getting smaller and on upside wave (d) > wave (b). This pattern looks like an orthodox inverse Head & Shoulder which is also a precursor for accumulation. So intermediate wave e, of ongoing Diametric got completed at the low of 7690 on 29th September and post that we are seeing upside move in form of wave f. This upside leg should consume around 10 days to 13 days and can travel towards 8300 – 8400 levels. In a nutshell, we expect Nifty to move higher and reach towards the zone of 8300 – 8400 in this up leg before the downtrend can resume. Participation from the sectors and market leaders near the zone of resistance will help us to gauge the overall structure. For now the path ahead is shown in Figure 4.” BANG ON!
Happened: Nifty formed a high of 8336 on 26th October 2015 and reversed from there. It indeed reached the target and resistance zone mentioned more than 3 weeks back. The second chart clearly shows the path as expected and the way Nifty traveled.
Read further on why News does not drive the trend! Again this was mentioned in our research report
News do not drive the trend: The month of September was eventful with FED meeting to hike interest rates and RBI meeting to reduce the key policy rates. We have constantly highlighted in the short term research report published daily that FED will refrain from increasing the interest rates given the weakness that US equity markets exhibited. FED action is lagging stock market. It is interesting to see half of the world fighting against deflation and planning to raise interest rates whereas on other side developing nations like India has been worried about Inflation and reducing the key rates. Well before the RBI policy meeting we hinted towards the lenient stand that RBI will adopt with minimum 25 bps cut and Mr. Rajan obliged this time in predictable fashion atleast for us by adopting easy rate policy and cutting Repo rate by 50 bps. This was surprise to majority of participants but the selloff in Indian equity markets were pointing towards weakening economy and so the sharp rate cut. Again this was a lagging behavior by central bank! News or events do not drive the trend but it is strong trends in equity markets that put pressure on government for taking corrective measures!
To know more and trade or invest using the objective scientific techniques rather than relying on News subscribe to the monthly update for medium to long term view and short term update “The Financial Waves short term update”. Trust me markets do not move randomly and this time again majority of indicators have been aligned together which is not very often occurrence!
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