Understanding the trend of Bank Nifty with application of Elliott wave, Channels and Moving averages!
Nifty has shown spectacular rally in last 3 trading session and prices have moved higher from 9075 to 9366 levels. Based on the basic as well as advanced concepts of Technical analysis we were able to capture the up move and you can see detailed research here. In last 3 months Bank Nifty has moved higher from 17600 to 22250 level till now. Although the rally has been corrective in nature as per Elliott wave theory but it has managed to follow 3 most important techniques which helps to ride the trend as long as it goes. Below chart on Bank Nifty is taken from “The Financial Waves Short Term Update” which was published in today’s research before the market open.
3 Techniques to follow the trend of Bank Nifty:
20 Days Exponential moving average: Moving average is the simplest concept however one needs to check from Trial and error method that which MA is suiting well to prices. 20 days EMA is providing excellent support and recently prices reversed on upside from the same. Positional traders can use this EMA as risk management.
Channeling technique: Before initiating any positions, it is better to see on charts that which channel is working. Small blue upward moving channel as shown below in daily chart has played its role brilliantly and up move resumed when prices tested the channel support.
Bar technique: In the entire up move we have observed that as long as prices continues to protect the low of prior bars on closing basis, trend continued on upside. Whenever prices gave close below prior bars low, consolidation was witnessed.
Bank Nifty daily chart:
(Part of research taken from today’s research)
Bank Nifty has continued to provide major support to the Nifty and this sub index is trading at the life time high. Let us look at the short to medium term structure of this index to understand the trend ahead.
The daily chart of Bank Nifty shows that prices have been respecting the short term upward moving channel. Recently prices made a low exactly at the channel support and then sharply moved higher towards the channel resistance. As per wave perspective, prices are in minor wave …. of third standard correction pattern and from here on it will be crucial to see if it breaks the channel resistance or starts to move in consolidation. Till that time it is better to follow the bar technique. As per this technique as long as prior bars low is intact on downside trend will be positive. 20 days EMA is proxy for the same which is constantly providing support to the up move. Medium term support as per this MA is near 21380. Medium term investors in banking sector can use this EMA as risk management strategy.
(60 mins chart with Elliott wave is not shown here which is covered in research report)
In the last session high volatility was witnessed which was in lines with that observed on Nifty as well during the day but prices later managed to close near the high point of the day which will keep positive trend intact. As shown on hourly chart, prices are now near the upper end of the channel resistance. It is not very often to see break above the upward sloping trendline but given the steepness it is prudent to avoid catching a top and trading in direction of the trend. Any break of … level will decisively break the channel resistance and suggests continuation of up move.
In short, Bank Nifty has immediate support at psychological ……. mark followed by ……… level. Move above …. is required to extend this rally further as it is also the equality level for wave c with that of wave a.
These are some of the techniques which we follow to capture and ride the trend. However one should also understand that continuous research is the key to be successful in a market. It is crucial to understand the market dynamics so that one can keep himself ready with different techniques.
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