Nifty had a huge Gap up opening and prices have taken out the level of 7820 as of now.
This might have been a big surprise for traders expecting market to move below 7680 levels. Also the credit of strong rise will be given to positive Global markets and strong close by US Equity index – DJIA. Simply think if we were so highly correlated with US markets then DJIA is trading near its life time highs and we are still nearly 15% below the highs.
Time cycles play very important role in order to understand if sentiments are about to change. Everything in the world is governed by Time and so does stock market. Look at the below 54 days Time cycle which we have mentioned about few weeks back itself and prices formed low very close to it. However, Time can be a tricky element and it is important to use other techniques like Neo wave – Advanced Elliott wave, Bollinger Bands to identify the key support area and for price confirmation as well.
Nifty daily chart with application of Elliott wave, Time cycles and Bollinger Bands
On 23rd May morning research report “The Financial Waves short term update” we mentioned the following:
Time cycle of 54 days is also due today which is normally a bottoming cycle. This cycle worked exceptionally well during the downtrend from 9119 to 6825 levels. However, as prices have broken above the channel for first time since the top of 9119 there is possibility that the cycle might change. However, today being the 54th cycle day we will closely observe if the buying interest starts generating from here on.
On 24th May morning research report following was mentioned:
Application of Bollinger Bands: The daily structure of Nifty suggests that prices are moving within the band and currently it is approaching towards the lower support area of Bollinger bands. Still there is no strong momentum as the band is intact and prices have not entered the downward sloping channel
On 25th May morning research report following was mentioned:
Application of Neo wave pattern: As shown on daily chart the rise from 29th February 2016 onwards is in double corrective pattern and prices are now in second correction. The high of 7992 and low of 7678 has been protected for many weeks now and there is a clear contraction with no trending move in either direction. The basic two patterns that exhibit such behavior is either a triangle or a 7 legged Diametric pattern which has first half as contraction and the second half as expansion. Prices are currently in wave d and post its completion we should start seeing wave e on upside. ……..For now, one can create long positions if Nifty manages to close above 7820 for a move towards ……. levels initially. A strong momentum above this level will open up further positive possibilities. On downside ………… is going to act as short term support..
Analyzing complex corrective pattern is not always easy and it requires combination of different techniques to be on the right side of the trend.
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