Euphoric rise in Nifty and especially a few stocks like Yes Bank, Bajaj group and selected Midcap / Smallcap sectors has created extreme optimistic environment.
It is during such extreme scenarios we need to be most objective to understand the key reversal areas along with the risk associated for being with the crowd. It is not easy to take a stand against the majority especially when the rise is euphoric. Nevertheless, there are a few indicators and methods that help us to understand maturity of trend. Also a trade requires prudent risk reward ratio. Prices can continue to rise but one should analyze is it worth the risk!
Now look at below few simple techniques and analyze yourself if the indicators are making sense:
Nifty daily chart with RSI:
The below excerpt is picked up from the daily research report “The Financial Waves short term update” published everyday morning before market opens.
TRIN indicator that measures the amount of money flowing into the stocks is now again reaching extreme overbought levels. Such readings are signal to be alert and we are closely observing short term movement to gauge if the trend is indeed in matured stages of up move.
PCR ratio has now crossed above 1.40 which is not very often. Also prices are close to the upper end of the channel resistance.
As shown on 60 mins chart, (shown in actual research report) prices are respecting the short term blue channel and also the 20 period Exponential Moving average. Decisive break below ……. can result into retest of ……….. zone.
Slowly and steadily the indicators are getting aligned but as mentioned earlier it will be only on break of support levels there will be any negative confirmation. Break below 0-b trendline followed by faster retracement below …… will be bearish.
In short, the uptrend looks to be in matured stages. Nevertheless, the rise had been euphoric and prices can reach extreme levels before a reversal. Break below ……. can result into short term sideways to negative action with ……….. as important level to observe.
Few levels are purposely omitted from above as the same is meant for our subscribers. Nevertheless, the chart itself shows why we think prices are in matured stages of up move. Throwover cannot be completely ruled out but think again is the risk worth taking?
To get insight into important support levels and Elliott wave perspective on Nifty and stocks you can opt for the research report “The Financial Waves short term update”. For Sample copy of your research Contact US