Wednesday, September 28, 2011

Nifty moving in a wide trading range...

Nifty Daily chart

Bottom Line: Nifty had a strong day yesterday and closed up by more than 2.5%. It has become a norm for Indian markets to move by more than 2.5% every alternate day but in opposite directions!

Nifty witnessed a Big up day and rallied by more than 130 points. We were not expecting a deep move up and sudden “V” shape recovery across the globe. This exactly proves why Risk Management and Position sizing becomes extremely crucial during such times when markets move wildly in a range. Wave counts are very tricky for now and we might be forming a complex X correction.

We think prices are moving in a triangle pattern since the centre of triangle is most violent with gaps and no clear direction. It is often said to avoid trading a triangle and wild movements like this vindicate the old saying.

For now the short term bias has turned positive as long as today’s gap remains unfilled at 4912. The immediate resistance is now at the big down gap seen at 5060 - 5110. 5060 is also the upper trendline of channel and so it would not be taken out easily.

Friday, September 23, 2011

Nifty Biggest decline since 2008! DJIA pushed off the cliff !

Nifty Daily chart:
Bottom Line: Nifty also sold off in the Global Meltdown. This selloff in Global markets can be BIGGER than anyone can anticipate. Ideal candidate to go short is US market’s index – DJIA!

Nifty witnessed biggest drop since October 2008 and fall by more than 4% in single day. This is one of the biggest down close since the rally started in March 2009. We can clearly see from intraday charts that Nifty opened at exactly at our support levels of 5050 – 5030, traded there for couple of hours and then started the deep correction.

Indian Rupee saw one of the biggest decline against dollar i.e. USDINR pair rallied by more than 2% in a single day indicating heavy rush for US Dollars. Also Indian rupee is falling against Euro, GBP, JPY making it the weakest among the pairs. US dollar strengthening is true across the global currency pairs and people are putting money in US treasuries as safe haven and moving out from almost everywhere. We are in Global meltdown scenario and please do not initiate any long positions as the bounce can be steep but just short lived.

We are bearish on World markets including India. Volatility is going to increase and we hope to see a trending move which is a paradise for traders. Now can be the time when Indian markets hopefully start trending even if it is down but that presents very good opportunity for trend followers.

Next support level for Nifty is now near 4790 but when capitulation happen supports rarely holds. We might sound too bearish but we want to convey the intensity of recent selloff we are seeing globally and prepare our readers for the worse!

Friday’s are not good for Indian markets and history shows that steep selloff that starts on Thursdays usually continues till Monday – Tuesday.

Alternatively a rally back above 5050 will indicate we are just moving in a triangle thereby fluctuating the emotions from fear to hope and vice-versa. But this remains very low probability.

In short, we remain strongly bearish now given the intensity of fall in 1 day and look for 4790 as support and 5050 as resistance level.

Dow Jones Industrial Average Daily chart: (as on close of 21st  Sept)
Above chart shows spot price of DJIA (US market as on close of 21st September). As we said before “NSE has launched DJIA futures contracts which help us to participate in the directional movement of US markets. The chart shows that we have fallen impulsively from 2007 to March 2009. This fall was either wave (A) or wave (1) of primary degree. After the downfall we rallied back in the form of 3 waves (W–X-Y). This upward correction looks complete at the top of 12780 on 21st July 2011. Since then we can see a steep selloff wiping off months of gains in just few days. This is the power of trending move and that was just wave 1 of primary wave (C). We shall very soon start wave 3 of primary wave (C). This wave we expect is going to be steeper than wave 1 and will be most violent wave. If our wave counts are correct wave 2 is almost complete or will get completed by end of this week then opening up wave 3 on downside atleast till 9500 – 9600 levels.”

We are looking at US markets offering better opportunity than Indian markets for traders as it is in a clear downtrend seen from above charts. DJIA by mid-day has already broken below 10700 levels thereby confirming start of next 3rd leg down. We do not think it will whipsaw again and re-enter into the channel above 11000 but we shall always be prepared for alternatives especially when volatility is very high.

In short, US markets look to have started 3rd leg down which is going to be steeper than the previous leg down. 11,000 should act as a strong resistance area and any close below 10700 will provide strong bearish confirmation.

Tuesday, September 20, 2011

Nifty should break above 5180 atleast this time! - Waves Capital

 Nifty Daily Line chart:
Nifty 20 mins chart

Line charts as shown on Daily chart can sometime reveal very vital information. We can clearly see higher lows and higher tops formation thereby indicating short term trend as positive.

From 20 minutes chart, we can see that we were moving in a triangle formation thereby forming a very difficult trading environment for past few days. Triangles are always challenging to trade and one should avoid trading them since all legs in a triangle are corrective.

We can clearly see a strong breakout in the form of wave c of this a-b-c upside move yesterday which is now headed above 5200 levels.

Immediate resistance comes in at 5177 but we are convinced it will be taken out on upside this time as more and more people are expecting this to hold. Also it has been tested quite number of times now to hold valid this time.

In short, the trend up remains strongly intact as long as 5070 is not taken out on downside for move atleast near 5300 levels.

Friday, September 9, 2011

Friday continues to be bad for the markets since past few months now!

 Nifty Daily chart:

Nifty 20 mins:
As shown on above charts, Nifty failed to sustain the rally and sold off steeply on Friday. We have been observing that Fridays have been bearish for the markets for many weeks now. The opening on Friday was flat but the selloff started in later part of the day and Nifty closed almost 1.9% down.

Trend over next 1 or 2 days looks to be down given the selloff across the sector but we would maintain our stand as this leg is wave ii of c and not fresh down trend. As long as 4994 is not taken out on downside we will keep current bullish count intact. A move below 4994 will indicate alternative scenario as wave c over at the top 5170.

We can observe that volatility has increased in Indian markets and the trends are smaller in either direction. This changes the market dynamics from rather than riding the trend for big profits but to keep booking the profits at every rise or vice-versa for the down trend. Indian markets have been very challenging and relative to global markets the movements in Indian markets make sense if we see it as leading other global markets.

In short, the downtrend might continue till 4994. We will watch how prices react from there and a decisive break below 4950 will indicate the uptrend from 4700 is complete at 5170 and next leg down has started. The up leg from 4700 – 5170 will then be marked as a complete X wave.

As long as prices take support at 4994 we maintain our stand as this is wave ii of c. A move back above 5100 will confirm resumption of uptrend till then watch for 4994 levels followed by 4950 on downside.

Wednesday, September 7, 2011

Nifty bucking global down trend! Looks positive!

Nifty Daily chart:

Nifty 20 mins

Nifty is failing to sustain the down move and smartly recovered during later part of the day. We are looking at the current up move as an A-B-C of an X wave and we have started wave C up. Wave b looks complete at yesterday’s low but we would still wait and watch today’s action for further positive confirmation. The next resistance level lies at 5200 which is the open gap on the prior down move.
As long as 4977 level is maintained we are looking prices to reach atleast 5200 and possibly higher to close the big gap between 5200 and 5350.
Nifty is still not in sync with the global trend as of now and severe selloff across European indices over past few days failed to impact Indian markets. We maintain our stand of “cautiously positive” on Nifty as global markets are still exhibiting weak structure.