Nifty rallied out of Diagonal pattern as mentioned before!

Nifty Daily

Nifty 120 mins

Nifty 10 mins

We mentioned earlier that, “Nifty can rally steeply from here (Current 5400) and move atleast till 5500 over short term. Today's low should be maintained and we will eventually touch 5600!” This is exactly what happened and Nifty rallied steeply making a high of 5486.

As seen above the rally looks incomplete and we should continue the uptrend for sometime. Next resistance level above 5500 is 5600 and it is important to observe how prices behave from that resistance zone.

Nifty broke above 5400 - Ending diagonal pattern complete!

Nifty can rally steeply from here (Current 5400) and move atleast till 5500 over short term. Today's low should be maintained and we will eventually touch 5600!

Sensex: Time cycles - Alternate counts

Sensex Daily

Nifty 120 mins

Sensex Daily chart above shows the long term trendline with support level coming at 17,700. We have shown Blue and Red color Time cycles. Blue color time cycles are original and suggest lows might occur by June last week. But if we adjust that time cycle to accommodate recent low that occurred on mid Feb near 17400 we can see a low forming soon by May end(Red color time cycle). The chart also shows the alternate wave counts but this count fits well with cycle lows and support levels shown near 17,700. We will adopt this wave count after seeing how prices react from these levels and if we see a steep rally after hitting displaced cycle lows!

Indian markets broke below key levels just to re-enter into those levels without giving any significant down move. A failed pattern is dangerous as it can lead to short squeeze on the opposite side. We can see what has happened to stocks like LT when there is a short squeeze where shorts run to cover their positions.

We are keeping the alternate possibility chart of Sensex which shows we might be close to the bottom of the entire bigger correction that started near 21000. As we said before even time cycles are supporting this. We will adopt this alternate count when we see deep rally in Indian markets but for now we will stick with wave structure as shown on Nifty chart.

Nifty chart shows a strong positive divergence in momentum which means downward move is loosing steam. We can count the current move as i-ii, i-ii kind of a scenario which expects a steep move below 5400 or we are in a irregular flat correction that expects prices to move close to 5600. For now we are in no trading zone and a clear break of 5400 will indicate a strong down move has probably started.

Given the weakness in the global markets we might open gap down today but might soon cover the gap if we are in alternate irregular flat pattern. Let us wait and watch with patience what does market wants to do and act only if key levels on either side are taken out.

USDINR can start multi-month up move...Nifty should move down!

USDINR Weekly chart

Looking at USDINR above we can see that there can be some serious depreciation in Indian Rupee against USD. We can clearly see the Elliott wave markings on the chart and prices have formed Triple bottom at exactly 61.8% retracement of rally from 39 to 52 levels. The downward move is also overlapping and we can see a strong positive RSI divergence on weekly scale.

All this indicates USDINR should now start moving up and break the downward trendline. A break above 45.10 will provide strong confirmation that we might have ended multi-month down move on USDINR.

This also sends across bearish picture for Indian equities. We do concur that currency and equities do not move in lock step but the correlation does increases at major turning points.

Nifty 120 mins

Nifty 30 mins

We mentioned earlier that we were expecting a move near 5400 levels but that did not happen. Prices took a V turn and rallied steeply on last day of the week by crossing above our key level of 5600. But however Nifty made a high of only 5605 and moved back down immediately giving respect to this level. This movement was not anticipated by us and this is exactly the reason why we should have our Risk management levels decided before we enter the markets. There are times when we keep guessing the direction and corrections of any degrees are very difficult to predict.

We now see that wave (ii) is not yet over and is still ongoing. We now wait for 5475 level to be taken out on downside for confirmation that the down move has started. Till that happens we can see some more consolidation within the range. A clear break above 5605 will bring some more upward correction till 5640 – 5650 levels. Also the USDINR chart above conveys that Rupee might start depreciating against USD and that indicates we might start a 3^rd leg down on Indian markets soon but wait for confirmation below 5475 levels!

Nifty moved impulsively down!

Nifty 120 mins

Nifty 30 mins

Nifty has moved down impulsively from the highs of 5900 to 5440 levels. Indian markets have been quite difficult for trading for most of the traders given the steep movement that happens on either of the directions. Since past couple of months Nifty has not done anything and on net basis lies near about the same level but has seen big movements within the range. It has not moved decisively in a clear trend making it easy to lose money on both sides of the trend. So please be cautious as we can move in a very big triangle making it much more difficult but that remains a low probability scenario. For now, as seen on Nifty 120 mins chart, RSI which has entered into extreme low reading near 17 has come out of oversold state and touched 50 levels as we were expecting and making room to go down again. The movement in second half of the day yesterday broke below the short term trendline and down move could have started.

We are now bearish on Indian markets as long as 5600 is not taken out on upside but would remain cautious unless we get further price confirmation below 5490 levels!