Sensex Time Cycles and Symmetry

Sensex Anticipated on 1st November 2011:

Sensex Happened:

Bottom Line: Sensex cannot move more systematically in sync with Time cycles than it is doing currently.

Sensex: Time Cycles

We mentioned previously on 14^th October, “Everything is so systematic that it cannot be controlled or manipulated but humans by default exhibits this natural phenomenon and makes prices move within channel, following 15 days rally, that retraces 76.4% of fall, with each down leg having 3 waves, and each 3^rd wave forming positive divergences!!! 

If the same systematic approach continues the current rally is only in its 6^th day with approximately 9 more days to go and current up leg should also retrace 76.4% of previous down leg taking it near 18000 to 18300 levels which is also the upper end of the channel, 23.6% level of retracement level of entire rally since bottom of October 2008 (now act as resistance) and resistance line coming in from November 2009 lows (shown on 1^st chart). All these precisely converge together at 18000 – 18300 levels and this should be touched on 26^th October ( +/- 3 days).” Simply PERFECT!!!

This is what we mentioned again on 1^st November, “On 26^th October, Indian equity markets were open for only 1.15 hour on account of Muharat trading and 27^th October was holiday. So ideally 28^th October becomes likely date for 18000 levels and index opened with a huge gap of almost 400 points that day making a high of 17908. This is in perfect sync with the symmetry we have observed.

It is now imperative to observe how Sensex reacts from current levels. A sideways consolidation forming a rounding type pattern has been seen during previous tops near the downward sloping trendline and so we can expect a similar sideways consolidation near 17900 – 18300 levels before the down leg starts!” BANG ON!!!

Sensex formed a top near 17900 levels in 16 days and reversed from there. Prices started moving down and formed a low near 15400 levels within next few weeks as predicted. As highlighted on first chart (circled area) on November 1^st clearly stated that an intermediate bottom should be in place during second week of January and BANG ON Sensex formed truncated low on 9^th January 2012 at 15650. Since then we started rallying and now are close to 76.4% retracement level of previous down move. Also we are near the channel resistance which gets intersected at 17400 - 17500 levels.

If previous structure has to continue we can form a rounding pattern in form of sideways action over next few days. We can also see each rally has taken on an average 16 days and current rally is in its 16^th working day today from the truncated bottom on 9^th January 2012.

To conclude, up time cycle i.e. average 16 days of rally, channel resistance and 76.4% retracement all are in range of 200 points of Sensex and so it would be crucial to observe if we breakout from here. Close above 17500 will raise the odds that the rally is continuing but as long as that is not taken out we are assuming the previous similar pattern and structure is intact and we can move sideways or down from here. A move below 16800 will confirm previous pattern is intact and downtrend has resumed.

From trading perspective it is better to stay out in current week and let market prove itself which path it wants to follow, positive above 17500 or bearish below 16800!

Interim Update - Waves Capital

Bottom Line: Sensex and Nifty has reversed from crucial resistance level of downward sloping trendline of entire 2011. Important resistance lines are usually taken out with Gaps and failure of prices to rally above this might indicate weakness in current week.

For the first time in this entire move up from 4700 to 5200 we are seeing a big Gap down opening and if Nifty fails to cover the gap today or by tomorrow it will indicate correction of entire uptrend has started. Please cover your long positions at current level and reinitiate only above 5225. Break of 5100 will confirm short term downtrend and shorts can be built below 5100.

Waves Capital: Published at 11:45 pm to subscribers
http://www.wavescapital.com/, Email: helpdesk@wavescapital.com

Nifty at crucial juncture!

 Nifty Daily

Nifty 60 mins

Nifty continued to show very good weekly performance and poor results by heavy weights like Reliance did not hamper the uptrend.

Nifty now lies at very crucial juncture of 5200 levels. This is the level where the trendline from November 2010 (since down trend started) intersects prices. As seen on daily chart, a close above 5250 level will give confirmation that this channel is broken. However on Sensex 17400 – 17500 will provide that confirmation and we have seen it in past when Nifty gave false breakouts above the trendline but Sensex did not. First half of next week will provide additional vital information about future path of this up trend. If prices struggle to break above this trendline and closes below 5100 we will know the best part of uptrend is probably over and we can be in wave iv of this impulse or a correction of this entire move up has started.

RSI has also entered into new territory which was not seen during the entire move down in 2011 and so this trend up is different than the previous corrective up moves. The momentum is stronger than prior moves.

As seen on 60 mins chart, RSI has been moving in very bullish pattern taking support near 50 – 60 levels. This type of movement is seen usually during impulsive moves and so we are sticking with impulsive wave counts for this uptrend. Also the bias continues to be positive and there is not sign of exhaustion as of now.

In short, we remain positive but will just remain cautious as we are running into series of resistance levels. A close above 5250 will indicate further positivity atleast till 5325. Any move below 5100 will indicate short term pull back or correction of entire uptrend has started.

Please trail your stop now towards 5095 levels.

Nifty Step-up move continues: Next few day's trading action to give important clues for Wave Structure...

 Nifty Daily Chart:

Nifty Daily chart: A step up rally continues…

Nifty 60 mins chart:

Nifty had a very good week and closed on Friday near the week’s high. Prices rallied from the low of 4827 and made a high of 5065 on Friday. Real Estate, Banking and Metal sectors had very good rally and smallcap, midcap stocks showed very good impulsive moves not seen in past entire year of 2011.

As seen on daily chart, prices continue to give respect to the upper trendline of the blue channel from where it took support on Friday and rallied steeply during final hour of trading. Reliance results as per newswire were below expectations but we would refrain from commenting how this will impact stock prices today as we have seen TCS, even after declaring results in line with expectations reacted negatively.

Nifty second daily chart shows a very bullish outlook, given the step up move shown. We can see that since the bottom at 4600 prices has moved up 1 day then corrected for 5 days, after that prices moved up by 1 day corrected by 4 days, then 1 day up corrected by 1 day and 1 day up again yesterday. Time wise corrections are getting smaller and the rally looks to be getting steeper. We have shown that there is increase in the degree of rally when measured against the horizontal axis. This is very bullish to us and usually happens during 3rd waves. Such scenarios do not happen that often and are rare species seen on charts during corrections. However the caution sign is magnitude of each up day. We are not seeing each up day bigger than the previous up day and so we will keep the options open as this up move as corrective and not impulsive. Either ways the rally should continue up and from trading perspective do not make much difference.

Nifty 60 mins chart shows that 4945 which was previous resistance should now act as support and please trail your stops to this level. As long as this level is intact we remain firmly bullish and prices can reach 5100 and plausibly higher. Today’s and tomorrow’s action will now reveal if we are indeed in 3rd wave as any smaller rally from here will raise the red flag.

Readers of our report, who are long since 4685, please trail your stop now towards 4950 levels!

Nifty continues to move as expected!

Nifty Daily

Nifty 60 mins

As shown on Daily and 60 mins chart, Nifty continues to move in a well defined up channel. Prices are moving in consolidation since 2 days as expected.

On Friday, S&P downgraded France along with Italy, Portugal, Spain & Austria. It is being said that markets were already expecting this and Germany rating is kept unchanged which was very important. It will be now important to observe how world markets react on Monday given series of downgrades. A sideways to small negative action will suggest resilience to news event and internal strength globally. However, we still believe this news event will have temporary impact, if any, and the bigger trend will resume its direction which is up for now atleast in India.

As seen on 60 mins chart, we have either completed wave ii or b at the low of Friday at 4840 or which can complete near 4820 level. After wave ii / b is complete we shall start wave iii or c. The structure of wave up will make it clear if we are indeed in for impulse up or a corrective rally. Either ways, atleast one up leg looks pending and we should head towards 4940 – 4950 levels.

Midcap & Smallcap stocks continue to show very good strength. Stocks like Suzlon, IDBI, JSW Steel and largecaps like Hindalco, Tatatsteel, Tatamotors etc are showing amazing strength and have been moving the way we expected during beginning of January. Hindalco has infact broken above the 1 year downtrend channel which is very strong signal for metal sector as a whole. We had shown Hindalco blue print few weeks back and this is exactly in sync with our expectations which might be a surprise for many other analysts and traders.

For now, crucial support levels lie at 4800 followed by 4765 and as long as these levels remain intact we can head towards 4940 and plausibly higher. Increase in speed of rally is what is important if it is a 3rd wave else we will label this up move as well corrective!

Infosys Elliott wave analysis and Results.....

Infosys result weighs on the Indian markets but Bloomberg suggests profits beat analysts’ estimates!

Below is the chart of Infosys after the results were announced. Write to us on helpdesk@wavescapital.com to get complete elliott wave analysis and what we expect from IT industry as a whole. Few wave labels and path ahead for Infy have been purposely deleted from the below chart: 

Infosys Daily chart 

Infosys declared better than estimated profits as per Bloomberg but still this stock was down more than 8% in single day just based on future guidance. This is a very big fall for IT bellwether but is no surprise to us. For IT, we mentioned before on 27th December 2011 that “It is quite sometime since we covered IT bellwether TCS and Infosys. The above chart (shown on 27th December) is a Daily representation of TCS prices and it clearly indicates why we are refraining in providing any views on this stock. Prices have been moving up in overlapping formation with random movements within the channel. We also mentioned entire rally as corrective and so looking for selling opportunities”

This clearly put forwards the point what happens when wave structure suggests weakness but prices move up in overlapping formation. We believe that events do not drive stock market and can lead to only short term movements or spikes but it is the basic social mood and perception of the crowd that moves the stocks. Infosys movement after results clearly conforms to this belief.

To see what is path ahead for Infosys subscribe to our daily research publication of Indian equity markets - Short term Financial Edge. Write to us on helpdesk@wavescapital.com for more information.

Waves Strategy Advisors: New Product Launched: Nifty Trading Strategy Report

Waves Strategy (www.wavesstrategy.com):

We have launched a new product that does not show the complex technical analysis and Elliott wave analysis shown in our daily Financial Edge report. Our new report Financial Edge Trading Update will have only Nifty and is ideal for traders who would like to know trade setup for the day and are not much interested in wave structure and stocks. This new report is also published everyday morning before 8.30 am and clearly mentions the levels where trades can be initiated what can be the trading strategy for the day.

Please mail us across on helpdesk@wavesstrategy.com for more information or to see the sample report.

Nifty continues to pass cycle lows by moving sideways!

Nifty Daily chart

Nifty 60 mins chart

Nifty is not doing anything but just buying time maybe to pass out cycle lows. During start of the year itself we mentioned 16th Jan as the cycle low date and Nifty is probably moving closer to this date before breaking out.

On daily chart, we have shown 2 standard deviation line. This indicator suggests how much prices are deviating from the moving average over a period of 14 days. This indicator is now very close to the support level from where it has bounced back many times. This does not indicate direction but does indicate a strong directional move is expected soon as prices should again start deviating from their mean levels.

60 minutes chart is showing Nifty’s sideways action at its best. Nifty has been testing patience for directional players and is moving in a trendless fashion. We continue to maintain our stand that a close above 4800 will give a strong positive breakout & we can move towards 5100 levels but a move below 4685 will indicate further weakness ahead till 4600 levels.

Waves Capital: Nifty anticipated & Happened! AGAIN!!!

Waves Capital (http://www.wavescapital.com/): The below chart was published on 30th December morning 8.30 am in Financial Edge short term update (Daily research publication) that showed the possibility of triangle formation and the crucial support and resistance levels which holds true even as on date.

Nifty 60 mins chart

Nifty as on 4th December 2012

The above chart itself explains how well the levels have been respected and even the triangle pattern that we showed as a probable scenario between two converging lines has been respected even today. Please write to us on helpdesk@wavescapital.com if you would like to subscribe and be a part of this objective analysis and reduce emotional stress!

Nifty path ahead 2012:

Nifty Weekly: Path Behind 2011

Nifty Path Ahead: 2012

2011 Snapshot:

Nifty weekly chart shows what we left behind in 2011. The entire move down is well channeled in 2011 and complex. The year was one of the most difficult year maybe in a decade because of overlapping complex pattern formation. There was no clear trend in either direction. 2003 – 2008 had a good up-trending phase. 2008 had good downward phase where Indian markets moved down steeply. 2009 – 2010 again showed up-trending moves with election gap (circuit up) during mid of 2009.

2011 however did not produce big trending moves but intermittent minor trends. First chart shows 20 Blue bars (Weekly closing up) and 31 Red bars (weekly closing down). This statistics is itself sufficient to convey how Nifty index has moved. But please understand the stocks and sectors behaved very differently during the same period. Sectors like Banking, Real Estate, Capital Goods, Metals performed very poorly whereas sectors like IT, Healthcare, FMCG outperformed. The market as a whole was completely divided.

2012 PATH AHEAD:

The second chart clearly shows what we are expecting in 2012. 69 days Time cycles that we have been showing since past 6 to 9 months is bottoming out around 16th Jan (+ 8 days). The prevailing sentiment is extremely bearish, which is contrarian indicator for us. A break of previous low at 4531 will turn even the remaining few bulls into bears and that is exactly where Nifty should bottom out for medium term.

Wave pattern forming is an ending diagonal (Wedge) and it satisfies the most important requirement of loosing momentum as can be seen from both weekly and daily chart where RSI is constantly forming higher bottoms. We are currently in wave e of this pattern or wave d is still ongoing. Either ways it will be sideways to lower drifting market with no strong direction over next week. An end of terminal pattern result in euphoric rise that retraces the complete previous down pattern in less than half the time and sometimes in just a fourth of the time. A move up as shown on chart will be surprise to many but not to our readers.

A new uptrend euphoria will then be created by Nifty breaking above crucial resistance levels as shown and a new bull market has started in 2012 will be the talk of the town. Nifty can move high to as much as 5600 – 5800 levels. However we would be looking out for shorting opportunity then during mid to end of March (as per 32 weeks cycle founded by Vivek Patil) that fits exactly in sync with our 69 days Nifty / Sensex cycles.

Also each of the leg of ending diagonal till wave c has taken approximately 9 days and so wave d and e combined should take around 18 days to complete this pattern. We have already completed 8 days and has 10 to 11 more working days to complete. This again gives us a date of 16th January 2012 which is exactly in sync with our 69 days cycle bottoming on 17th January 2012.

USDINR is also forming an Ending diagonal pattern on upside – a wedge like structure. Bank Nifty index is showing similar formation and losing momentum on downside. This conforms to our pattern analysis on Nifty.

On completion of top around 5700 we can start a steep fall that will be a good trending move again but on the downside.

In short, 2012 shall be a good trending year opposite of what 2011 was and hopefully a year less complex and with better tradable opportunities!

Adieu 2011 and Welcome 2012…