Nifty: “TRIN” indicator at extreme levels! Applied with Hourly Elliott wave counts

What is the 'Arms Index - TRIN'?

A technical analysis indicator that compares advancing and declining stock issues and trading volume as an indicator of overall market sentiment. 

The Arms index is calculated as follows:

TRIN = (advancing issues/declining issues)

               (volume of advancing issues/

                 volume of declining issues)

TRIN indicator is the ratio of advance/ decline with advancing and declining volume. We have been using this indicator to understand overbought and oversold level. The chart of TRIN suggests that the zone of 1.2-1.3 is the extreme oversold level. 

We can see that in the mid of June as well as in the start of September 2015 reversal was witnessed from this zone. Hence, this indicates that lot of volume has already gone on the downside and Nifty is now trading in oversold territory. One should use this kind of indicators as a warning signal but it will be only on break of resistance on upside we will get positive confirmation.

Nifty 60 mins chart:

The above chart shows the internal Elliott wave counts of Nifty along with crucial levels (shown in actual report). Nifty had a Gap up opening in today’s session and is so far sustaining above the same. It will be important to see if the crucial resistance is now taken out for short term positivity to continue.

Such oversold readings on indicator can result into sharp reversals and we have seen that over past few days when majority was expecting capitulation to continue, markets has been surprising them by Gap up moves.

It therefore becomes important to apply different techniques like Channels, Pivot support resistance zone, Elliott wave, indicators like TRIN, RSI, etc Time concept of Neo wave to understand the maturity of trend.

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