Tuesday, August 9, 2016

Nifty Fractal nature: Comparing the ongoing up move with 2014-2015 rally!

What should be the trading strategy post RBI policy announcement? It is better to look at the Fractal nature and Elliott wave pattern.

We believe that market does not move in random fashion and it forms different kind of patterns as per Elliott wave theory as well as basic technical analysis which can guide us for the upcoming trend.

There are times when markets do form similar patterns between the different time periods which is called as Fractal nature.

Below we have shown 2 charts of Nifty. First chart is of 2016 and second chart is of 2014-2015 which shows up move in form of Expanding pattern! Isn’t it surprising to see the development of similar pattern!! “The Financial Waves Monthly Update” is published which covers in-depth research on Nifty, BRIC Nations, one stock from long term, Comex Gold, Dollar index  and Mutual Fund investment.

Figure 2: Nifty daily chart

(Elliott wave counts are purposely removed from above chart and are shown in actual research report)

Figure 3:Nifty daily chart for 2014 - 2015

Nifty continued to move higher in the month of July and formed a bullish bar with low near 8287 and high near 8675. Since the low formed at 6825 we have not seen a single bearish monthly candle formation and the low of previous month have been decisively protected. Bar technique is one of the simplest and most objective way to understand the direction of the trend and the method is completely unbiased. As per this technique …………

GST and Euphoria: The much awaited GST Bill was passed in Rajya Sabha on late evening of 3rd August. On next day index we had a gap up opening near 8600 levels but prices entered into red territory immediately. This was pointing towards the fact that the news was already discounted. Nevertheless, it seems markets are reacting a day later as there was a strong gap up opening on 5th August and buying was seen throughout the day. ……

Comparing the current rise from 6825 with that of 2014 – 2015 rally: Look at the rise in Figure 2 and Figure 3 closely. Both the patterns show expanding behavior. Movement from the lows of 6825 matches the pattern of 2014 – 2015 very closely. Also the final leg of up move in wave e formed an Extracting triangle pattern with rise getting smaller and fall getting bigger. The recent pattern in form of wave e looks similar where each of the rise has been smaller but falls are bigger. This concept of seeing similar patterns at different time and degree is known on Fractal nature.

To get detailed outlook from medium term perspective on Indian equity markets, stocks, Commodities - Gold, Forex, Mutual Funds, BRIC nations. Subscribe to “The Financial Waves Monthly Update” by visiting Pricing Page

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