Wednesday, February 8, 2017

Nifty moving precisely as per Zigzag pattern post RBI policy!

RBI maintained status quo on key policy rates and kept repo rate unchanged at 6.25%. Nifty movement post the policy has been precisely as expected as per Zigzag pattern.

New RBI governor – Urjit Patel continues to surprise the street by continuing the unpredictability seen during the tenure of Mr. Rajan. In an interview today on ET Now I distinctly mentioned to accommodate for surprises during final hour of trading. Following is a brief transcript of the interview:

ET Now interview transcript:

Q: What should be the trading strategy on major index today given the macroeconomic policy later in the day?

A: It is better to adopt buy on dips strategy on Nifty rather than buying at current levels as prices are moving in complex pattern. Any dips towards the level of 8715 – 8720 can be used as buying opportunity with 8685 as stop and then expecting a target near 8800 levels over short term. This is based on the fact that after the strong bar formation on Budget day Nifty has been showing smaller bar sizes and some loss of momentum so during such scenarios and given the pattern analysis buying on dips is better strategy to adopt.
Now look at the below research which helped us to adopt the above trading strategy. This was published today morning in “The Financial Waves short term update” – daily equity research report

Nifty 60 mins chart: (shown in morning of 8th Feb 2017)

 Wave analysis:  published in morning on 8th February 2017
… Market reaction and close today post the RBI meet is going to be important. It is expected that there can be 25 bps rate cut in the policy meet but that is not necessary. RBI new governor is also known for surprises so we will wait to hear from him (It seems new RBI governor is following the path of Mr. Rajan to keep surprising)

We are showing Hourly Bollinger bands® as there is possibility of some consolidation. The support as per this is now near 8710 level on downside and the resistance is near ……... So a decisive move above or below this indicator is required to confirm the short term trend. As per wave pattern, we are now in wave iii within Ending diagonal. Move towards 8710 – 8720 (Nifty made  a low of 8715 precisely at average of support given by us) will indicate wave iv ongoing post which we should see one more push on upside in the form of minute wave v which will complete wave ………. of Zigzag pattern. So range bound trading strategy might work well over short term.………………. Let us see if prices are contained within this range today even post RBI meet or gives a decisive breakout. Else buying near support and selling near resistance should work well for now!

Happened: Nifty made a low at 8715 which was exactly within the zone as expected and bounced back sharply from there. As soon as Nifty formed minor positive hourly bar we gave buy recommendations to our Stock and Nifty tips clients with partial profits booked to lock to make it risk free.

Now the entire strategy has been developed by understanding the pattern – Ending Diagonal as per Neo wave – Advanced Elliott wave. If we know where we stand on the path we have the address for the market and the road map ahead. It is all about probability! Irrespective of the news or event price movement has been very accurate so knowing the Elliott wave pattern is the key to trade successfully keeping the crucial stoploss in place in case lower probable scenario plays out.

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