Thursday, November 24, 2016

Nifty applying Bollinger Bands® with Elliott wave for support, resistance reversal areas

Below article explains application of Bollinger Bands along with Elliott wave and channeling concepts on Nifty.

Indian Equity Markets has reacted negatively in last few weeks post the announcement of Demonetization by Government. Nifty has moved lower from 8598 to 7915 level till now and arrived near the BREXIT low which was created in the month of June 2016.

In current week there is less volatility and during the same time Bollinger Bands technique works well to identify important support and resistance levels. In the below 60 mins chart we can see that during the volatile move Bollinger Bands expands whereas during the sideways market it contracts.

Nifty 60 mins chart: (Research taken from todays The Financial Waves Short Term Update)

(Part of research taken from todays The Financial Waves Short Term Update)

Wave analysis:

“During sideways market, Bollinger Bands provide good support and resistance levels. Prices are now near the upper end of the Bollinger bands and the lower end of the band is at 7920 which is close to the previous pivot low formed two days back. 8105 is also the level of previous wave x and so strong momentum above it is required for retracement of the down move but unless that happens we can expect range bound movement between 8100 and 7920. Today being the expiry of the eventful month and sharp fall of past few days’ volatility can be expected in second half of the trading session.

From wave perspective we are currently in wave … of second correction pattern which is either forming a Triangle or a Flat correction as mentioned in earlier update. Post completion of this wave .. we can expect a retest of the earlier lows in form of wave …. Also normally important lows are formed on back of positive divergences. There is no such divergence on daily or hourly chart and this is another reason why we expect retest of lower levels again.

In short, Nifty can continue to consolidate within the mentioned range. Trading strategy should be selling near resistance and buying near supports with strict stoploss to capitalize on the consolidation.”

To know the short to medium term Elliott wave counts on Nifty as well as important reversal areas, subscribe to “The Financial Waves Short Term Update” which covers Nifty and 3 stocks on daily basis. For subscription options visit Pricing Page

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