Monday, August 29, 2016

How to trade Nifty Post Fed meet?

Trading Equity and Nifty by looking at various technical indicators like Breadth, Channels, Elliott wave, Net new monthly high lows and more.

Indian Equity Markets has been moving in a range from last few weeks. Traders and investors were waiting for Yellens speech which completed on Saturday last week. Fed has given hint towards the first rate hike since last December. But post the speech there is mixed reaction in Asian Equity Markets.  Nikkie 225 gained 2.30%, Hang Seng index lost 0.45% and Shanghai had flat closing. So the hint towards the rate hike has not resulted in to any knee jerk reaction in Asian Markets till now. Nifty is trading on the flat note as on 1.25 p.m. Now the question arises what should be the trading strategy for Nifty from here on?

We believe that news or event results into short term spikes and post which original trend should start. The Financial Waves Short Term Update covers in-depth research on Nifty with Elliott wave perspective. For us market behavior is most important rather than any news or events. The part of the research is taken from report dated 25th August 2016 which is shown below with Breadth indicators like NSE net monthly highs lows.

Nifty daily chart:

NSE Net Monthly Highs Lows:

Courtesy: icharts

Wave analysis:

In the previous trading session Nifty continued to move in lackluster environment and consolidation was witnessed in between 8660 and 8620 level. Sector wise Midcap and Smallcap index has continued to outperform whereas Bank Nifty has been moving in range after the sharp rise. Stock specific action has continued in which Auro Pharma, Cipla, Maruti and ZEEL were among the top gainers. This suggests that as long as we do not witness decisive breakout in Nifty, it is better to trade with stock specific however one should not leverage much and strict risk management is must.

Understanding Internal Breadth: the entire month August 2016 has been challenging from trading perspective due to the contracting nature of price action. Moreover such contraction is happening near the trendline resistance and hence it becomes crucial to gauge the internal health of market. As per the concept of market breadth, the uptrend is strong if advancing issues are more and declining issues are less however if advances are less and declining issues are high then it is called as deterioration in market breadth. This can be seen by looking at the deteriorating Advance Decline line that has broken below March 2016 lows from where the rally started.

Looking at another Breadth indicator NSE Net Monthly highs Lows chart. This indicates that in the start of July 2016, most number of stocks registered the monthly highs however post that there is clear down trend in this chart. This suggests that as the trend is ongoing fewer stocks are touching the high which is sign of concern. Hence this sends warning signal however it is better to wait for market to confirm the same.

Please note these indicators provide early warning signal but unless there is price confirmation by break of crucial support levels one should not preempt reversal. These levels are respected very well for many weeks now. To get insight into the next crucial level which will hint towards trend changer Subscribe to The Financial Waves Short Term Update by simply visiting Pricing Page

Friday, August 26, 2016

Why Moving averages are the keys to successful trading?

In Technical analysis, Moving average is one of the simplest and ideal to way to identify the trend. In most of the books of technical analysis, importance is given to 200 days moving average. For instance, if stock is trading above 200 days MA then trend is positive and vice versa. But, we differ from this stand as it is not all charts or asset class that follows the 200 days MA. Thus it is important to identify which moving average is suiting that particular stock. It is like when you go to the shop to buy cloths. Person will buy that cloth which suits him in size, color, etc. Same is the case with moving average as different stocks follow different averages. Below we have shown chart of Yes Bank taken from The Financial Waves Short Term Update.

Yes Bank weekly chart:

The concept of moving average is simple but it is not only for short term trading. It is also useful for medium term investments. Above we have shown chart of Yes Bank which has doubled now from the low made in the start of 2016.  This stock is brilliantly following 5 weeks Exponential moving average. Not a single time prices have given close below 5 weeks EMA since the low made at 650 level in the start of 2016. Prices have maintained its uptrend irrespective of quarterly results or Global market volatility. Isn't it interesting?

Technical analysis is vast subject and therefore it is important to understand the different concepts and post that one should form trading or investment strategy. To know the in-depth research on Nifty and 3 stocks on daily basis, subscribe to The Financial Waves Short Term Update and for subscription visit Pricing Page

Wednesday, August 24, 2016

Nifty inverted scale- What to expect next?

Stock tips and trading on Nifty can be challenging in sideways market. Below shows how charts can be looked differently.

Below is the Nifty 60 mins chart. At first instance one may get surprise as this shows that prices are in downtrend from last few months. However this is not true and we have shown Nifty on inverted scale. Inverted scale means totally the opposite image of the original chart. The reason behind showing this in The Financial Waves Short Term Update is to analyze the chart without any bias. The range bound action of last one month has resulted in to more confusion among trader and investors. During such scenario inverted scale chart can provide some hints towards next trend. One should always use price confirmation techniques to confirm the trend. Below research we have taken from the report published in the morning of 23rd August 2016.   

Nifty Inverted chart: 60 mins

(part of research taken from 23rd August 2016)

Wave analysis:

Nifty had a positive opening but prices drifted lower in the opening hour itself and touched intraday low of 8614 during later part of the day. Movement was absolutely sideways within the narrow band of 8650 and 8620 for most part of the day. Such narrow movement for many days has turned the environment dull and lackluster. Picking up stocks during such conditions is also not easy. Stocks like Voltas, Petronet LNG, Cairn India that were showing strong momentum suddenly reversed with a loss of nearly 3%. This suggests that stock picking can be challenging.

Nifty 60 mins on inverted scale, as we tend to look at patterns differently during a downtrend. As per this chart, Nifty is intact in downward moving channel from last few months. However from the start of August 2016 momentum on downside is not building and there is probable formation of Ending Diagonal Pattern which suggests that trend may be at the matured stage. Again look at the scale which is inverted. Apart from that, 194 hours Time Cycle is working well to capture important reversals. Prices are now close to the same cycle and hence action becomes crucial of next few days. So whether it’s inverted or normal chart, we can see that signs of maturity exhibits on both these charts. This is the ideal way to look at the market without any bias. Nevertheless use of price confirmation is most important to confirm the scenario which we will get only…...

There are many ways to analyze the market and maintaining the objectivity is must while trading. Hence one should be prepared for the next trend with key reversal areas which can guide for the breakout. To know the in-depth research on Nifty with medium term as well as short term Elliott wave counts and 3 stocks, subscribe to “The Financial Waves Short Term Update” Subscribe Now by visiting Pricing Page

Monday, August 22, 2016

Post Olympics what to expect from Brazil!

Olympic Games Rio 2016 comes to an end with US, UK, China at the top rank of the table and India managing to get 2 medals – definitely a proud moment for the country.

It is said and believed that Olympics results into lot of economic activity around the country and helps in stimulating country’s economic growth led by tourism and other technological development to manage the entire event.

Let us try to look at Brazilian equity market and see if the event indeed resulted into a stand apart movement on stock market or the overall movement has continued as per the ongoing trend for many years.

Below chart of Bovespa (Brazil) was published in our monthly research report on 6th August 2016. This clearly represents that irrespective of the event the stock market has continued to move within the blue channel and prices reversed on upside in early 2016 which coincided with lows formed in a few of the Emerging equity markets like India.

So was it really Olympics that helped Brazilian stock market in 2016? It seems more like a coincidence to me!

Figure 5: Bovespa (Brazil) weekly chart

Below is part of the research from “The Financial Waves Monthly update”

Brazil stock market index - BOVESPA  shows that after forming a top in early 2008 this index has still failed to cross above that highs and has corrected substantially. Later after topping out in late 2010, this index has continued to move in downward sloping blue channel and has now arrived near the resistance. It will be crucial to see if the same can be broken this time or prices again reverse back on downside. Brazil had not been preferred destination and the correction that started in 2008 is still ongoing.

Out of the BRIC nations it seems only Indian markets have lived upto the expectations to some extent post 2008 and rest other nations have failed miserably. This is another reason why we think the ………..

Olympic Games Rio 2016 now comes to an end. Let us see if the blue channel that has worked so well for Bovespa continues to act as resistance irrespective of the event!

“The Financial Waves short term update” and “The Financial Waves Monthly update” provides indepth research using technical analysis concepts like Elliott wave, Time cycle analysis, Indicators – RSI, Channels and lot more. Get access to these reports along with detailed Elliott wave charts and analysis on Nifty, Bank Nifty, stocks and Global markets. Visit Pricing page for subscription options or Contact US on helpdesk@wavesstrategy.com or on +91 22 28831358 / +91 9920422202 for any queries.


Tuesday, August 16, 2016

How to trade Nifty using RSI and Channeling techniques?

Below article highlights Trading using technical analysis methods like RSI and Channels and its application on Nifty.

It has been many weeks since Nifty is trading in a range of 8500 and 8750 levels. It was more than a month back on 13th July when Nifty crossed 8500 levels in this rally and it has failed to show any strong trending move post that. Stock specific action has continued during this period. The structure looks like an expanding pattern with wave …….. currently ongoing. This pattern is very similar to that seen during the 2014 - 2015 rally in expansion before finally topping out in March 2015.

Now look at the below chart of Nifty that shows application of multiple channels along with RSI:

Nifty 60 mins chart:

Application of Relative Strength Index (RSI): measures the strength of an index or stock with respect to itself. Many confuses this simple indicator with that of relative comparative where we measure the strength of one asset or stock with that of other. RSI basically measures the momentum of the market and helps in providing earlier warning signal in case the ongoing trend is in danger. However, a lot of novice traders simply rely on overbought and oversold state of RSI to create positions which is a blunder if there is no price confirmation. Also overbought zone is not always defined at 80 but has to be derived from the earlier extreme levels seen on the chart for that time period.

During a range bound movement RSI works very well when combined with channeling technique. In the hourly chart, we can clearly see that RSI has been reversing from the zone of 30 and from 70 - 80 zone. At the same time prices are moving within the red channel and reverses exactly from its support and resistance. For now the trend is …… and the channel and RSI resistance is now near ………… levels. It will be important to see a decisive break above this channel for extending this rally further. Failure to see upside momentum above the zone might result into retest of the lower support line again.

The above research is picked up from the “The Financial Waves short term update” our main flagship product covering Nifty, Bank Nifty and stocks on rotational basis that shows application of various technical analysis methods along with Elliott wave. Indian markets are again reaching towards crucial juncture and we are expecting a strong trending move to emerge very soon. Know the key levels of support and resistance by subscribing to this research report NOW by simply visiting Pricing page

Friday, August 12, 2016

Nifty valuation Price to Earnings Ratio using technical analysis!

How to look at fundamental parameter like Price to Earnings Ratio (PE ratio) from technical analysis perspective?

Indian Equity Markets (Nifty) has continued to move in range from last few weeks. Markets were waiting for GST to pass out from many months which is finally cleared by Rajyasabha recently.

Many were expecting sharp rally post GST clearance however markets have been moving in range with important support intact on downside. Nifty is making new highs but not able to sustain the gains and reversing towards the short term pivot support levels. This is one of the examples that trading or investing based on news or events is dangerous and hence understanding market behavior applying various parameters is must. Below we have shown chart of Nifty and Price to Earnings ratio to see the valuations at current levels.  Apart from  this, we have also shown long term, medium term chart of Nifty with applied advanced concept of technical analysis which is shown in original report “The Financial Waves Monthly Update”.

Price to Earnings ratio chart

(Part of research taken from the monthly research report)

“Understanding the valuations: We take a step forward by looking at Price to Earnings ratio with a different perspective. In Figure 4 you can see comparison of Nifty with that of Price to Earnings chart. Nifty current PE stands close to 24. Previously, in March 2015 when Nifty touched all time high of 9119 the PE ratio was exactly at this level. Now when markets are at still lower levels from there the PE has already touched 2015 highs. This clearly suggests deterioration in the Earnings over the year. Also we would look at the overbought zone of the PE chart. The major tops formed in the year 2008, 2010, 2015 showed extreme PE readings and we have again approached at the same level.

We would refrain from using PE chart to call market tops as the irrational exuberance can last longer than anyone’s expectations. Nevertheless, this does provide perspective to the overall Elliott wave counts and pattern under development.” Detailed counts shown in actual research report.

The above is the part of research only. To know the pattern under formation on Nifty with advanced Elliott wave perspective, subscribe to “The Financial Waves Monthly Update” and for more information visit Pricing Page

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

Monday, August 8, 2016

Is Nifty forming an Expanding Triangle Elliott wave pattern?

Elliott wave pattern: Understanding the Expanding triangle pattern. What is the wave characteristic suggesting?

Bottom Line: Nifty had a Gap up opening above previous high and reversed the trend to positive. We can expect another highs as long as 8550 is intact!

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In the last update we mentioned that, “In short, looking at sharp pullback in a few stocks and overlapping fall in Nifty with no momentum there is possibility that the downtrend has not yet started. Close above 8610 will result into positive attempt ...the movement can be sharp so one should be quick to act!"

Movement on Nifty was indeed very sharp and fast. It is therefore important to have a prudent risk level in place while trading to protect against such sharp reversals. Buying was seen across the stocks and sectors. Many of the stocks broke below its previous support levels but only to reverse later as Nifty failed to confirm by breaking below 8490 on downside.

The current leg which started from 7925 levels is still ongoing as there was no faster retracement below the level of 8490 which was last rising segment. This indicates the trend is still positive over short to medium term. Given the number of days consumed by this leg and the expanding nature of the move post wave x there is high possibility that the entire move is infact a running expanding triangle and not Diametric. Currently wave (e) of this pattern is ongoing and prices are again approaching near the upper trendline of this pattern. As the pattern is upward sloping the resistance will keep on shifting higher and it will be only on break back below 8518 there will be sign of weakness. Unless that happens one should avoid catching the top in ongoing euphoria and let the rally run its course.

Banking index has also reversed from lower levels and we are keeping a close watch if it can manage to take out the highs of 19200 this time. Auto and Cement sector showed sharp rise a day after GST rather than on the same day.

As shown on hourly chart, movement post wave x is also in expanding fashion. This results into prices taking out the high without momentum and also the fall only results into reversal in few days. Expanding triangle patterns are most challenging for traders as crucial levels get whipsawed without any trending move. As per this pattern we should now take out the previous high of 8711 and prices can move towards 8730 - 8750 resistance zone. Strong close above this zone is required to extend the rally further.

In short, trend over short term is positive as long as recent lows near 8518 is protected. Avoid catching a top in current euphoric rise unless there is faster retracement below the mentioned level. We are closely observing if momentum builds up as prices approaches the trendline resistance level yet again which has been protected for many weeks now!


Thursday, August 4, 2016

Impact of GST on Nifty and stocks. How to trade post the news?

Impact of GST on Indian Equity markets – Nifty and Sensex and what should be the trading strategy post the event?

Many were eyeing on this one major event as positive trigger to carry the overall market higher and Nifty towards 9000++ levels. People want to see logical reaction by stock market after a news or event and they many had their bullish bets on passing of GST bill in RajyaSabha.

What is concerning me is that if the news was that significant then we should have seen a strong rally in the opening hour itself. Instead the Gap up opening was immediately filled in and now we are seeing a range bound movement.

GST in all its sense will benefit a few sectors like Auto, Cement, FMCG but might also hurt a few other sectors like IT, Pharma, Telecom which have to shell out more tax then they are paying in existing regime. 

Neverthelss, there is always more to the stock price movement rather than tax policy decision. What majorly impacts the business is the demand by consumers and the impact of input costs and what impacts stock prices is perception about the future demand and outlook. Too much euphoria had been created around an event which in all due respect is positive but markets are discounting the future and the study that helps us understand the current position of equity market is Elliott wave irrespective of the news or event.

Nifty 60 minutes chart:

Now look at the above chart and try to think can you identify the areas of major news or events and markets reaction to it?  Yes the entire price movement is well channelized and what more – Even the impact of Brexit was only temporary where prices found support near the channel and bounced back only find resistance near the upper end.

Look at today’s news or GST bill being passed in RajyaSabha which is considered as one of the biggest reform since 1992. But what is the impact on prices so far?

Case in point: News or events will only result into temporary movement but eventually the original trend will resume.

To know which are the key levels that will confirm a reversal along with detailed Elliott wave counts on Nifty and what should be the trading strategy going forward get instant access to “The Financial Waves short term update” a daily research report published before market opens and sent across on your email id. 

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Wednesday, August 3, 2016

Tuesday, August 2, 2016

Nifty: Application of Bollinger Bands®, RSI, Channels to identify the reversal areas!


Nifty and Sensex has continued to move in a range for majority of the time rather than showing a strong trending move. Bollinger Bands work best during such scenarios.

Non – trending movement is frustrating for majority of traders as there is no strong trend which is required to make the most out of the trade. During such phase one needs to be patient and adopt the indicators that work best in order to identify the key reversal areas for capturing smaller moves rather than trends.

Nifty 60 mins chart with Bollinger Bands, RSI and Channels





















The above chart shows some basic technical analysis method yet powerful tools that can help in identifying the key reversal areas. As shown, there are three most important techniques applied here – 

- Bollinger Bands – to capture the range and reversal areas
- Relative Strength Index (RSI) – to understand the momentum
- Channels to identify the key resistance or support zone

Now look at the above chart again and try to see how prices behave during month of June when it approached near the channel resistance and contraction within the Bands that confirmed sideways or range bound movement.

Let us now move to current scenario where the movement is again in a range after just few days of trend. Also during this entire movement lot of euphoria has been created as prices have been hitting new 2016 highs even though temporarily. At the same time RSI has been exhibiting negative divergence suggesting lack of momentum and channel has been providing strong resistance to prices.

Bollinger Bands has turned flat and the upper and lower bands are acting as important resistance and support respectively. It will be at that time when we start seeing expansion in these bands again with decisive break above or below the key levels a strong trending move will emerge!

Each of these techniques are in sync that the euphoria might be short lived but again most important thing is price confirmation which is still awaited!


To understand the key reversal areas on Nifty, Bank Nifty and stocks get access to “The Financial waves short term update” and see when the above techniques are combined along with Elliott wave counts. Also the reason why we are not expecting 9000++ levels like majority. To subscribe visit Pricing Page