Wednesday, November 18, 2015

What is Elliott Wave, Bollinger Bands®, PCR Ratio, Time Cycles suggesting for Nifty Trend?

Bottom Line: Nifty traded in a range as expected. Sideways action can continue for few more days!

The below research is picked up from "The Financial Waves short term update" which is published daily in morning before equity markets open. This report has Elliott wave and other technical tools applied on Nifty along with 3 different stocks

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In previous update we mentioned that, In short, there is some loss of momentum on downside. Partial profits can be booked on existing short positions and remaining can be trailed to the highs of 7870. Move below 7710 is important to resume the downtrend. For now expect few days of sideways action!

Nifty moved in a range yesterday as expected. Even when the Global markets were strong positive prices failed to generate any strong positive momentum and traded in a narrow range. High made was at 7860 which was close to the level of 7870 mentioned as short term important level.

Measuring change in Sentiments using PCR: Put Call ratio has reduced drastically towards 0.72 levels. This level is not seen for many months now. A higher value indicates more put built up whereas a lower value indicates some buying interest emerging. Many technical analyst use this as a contrarian indicator but we have observed it to be working more number of times in favor rather than taking a contrarian stand. So a lower value in PCR ratio indicates more Call option builtup compared to puts which is a positive signal. However, this indicator acts only as a warning signal and we will not act on this alone. As mentioned earlier break above 7937 which is last leg of falling segment is must for confirming positive outlook.

Bollinger Bands: A sharp reversal on upside following a sharp selloff usually results into range bound action between the Bollinger Bands. We have shown these bands on hourly chart and the resistance is placed near 7870 whereas support is at 7720 levels. A decisive close above or below these levels will be required for short term direction.

Elliott wave pattern: The selloff from the highs of 8336 is in the form of triple correction and prices are currently in third standard correction. This third pattern fell short of the target level of 7600 which implies that it is only a part of wave (x) or this correction is forming a triangle pattern as shown on the hourly chart. This is only one of the probable scenarios and next few days of price action is now required to confirm the pattern under formation. 

Predictability and accuracy is also cyclical to an extent and when prices are near the reversal areas one should wait for break of levels for clear trend confirmation. We have enjoyed very high degree of accuracy so far and it is now time to keep the emotions under check and let us wait for market to decide in which direction it wants to head again. Technical indicators are suggesting that the down trend is in matured stage.

In short, expect range bound movement to continue for few more days. Decisive break above 7870 followed by 7940 will be positive whereas any move below 7700 will resume the downtrend. Bank Nifty has 108 days Time cycle low on 20th November and we are keeping a very close watch on this index for leading indications!

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