Nifty starting Wave up!

Bottom Line: Nifty gave a strong move up and broke above crucial resistance levels. This confirms the pattern as Ending Diagonal!

Nifty Daily chart:

Nifty 60 mins chart:

Waves Analysis:

Nifty had a strong move up on last day of the week. Prices opened gap up above 5200 levels and rallied throughout the day. We mentioned in our previous update, Prices usually rise violently when they break out of Ending diagonal pattern and so maintaining stop of 5250 for existing short positions is extremely important. In short, a clear trend shall emerge very soon within a day or 2 in either of the directions…”

We can see that the rally has been violent and fast. Also the Advance / Decline ratio has been very much in favor of Advancing stocks. This type of behavior is usually seen in case of strong breakouts.

When the correction started on 2^nd Feb 2012 from 5630, we mentioned that the trading environment will be difficult and challenging. Market has vindicated that stand. Impulse waves are very easy to identify and trade and corrections are equally difficult. Most of the people lose what they earn during impulse waves in these types of corrections. Money management and less leverage is the key to maintain the profits earned previously.

March has been the most challenging month since the start of 2012 from trading perspective. There was no clear trend and direction. Markets exhibited high intraday volatility but making very little progress in either direction. On 1^st March Nifty was 5340 and on last day of the month it closed at 5295. This simply shows the entire month made almost no net movement in either direction despite being many events and scams being unearthed.

Also an important thing to observe is when on bad news market fails to move down it indicates inherent strength. Indian markets have been able to absorb all the negatives in March and has finally closed marginally down.

For now, the bias is firmly positive and we might have completed the entire wave B down at the low of 5136. Also the rally on Friday retraced the e leg of diagonal faster than it took to form thereby confirming that the trend is now positive from short to medium term.

From medium term perspective, we might have just started wave C on the upside and this will take us above the end of Wave A which is 5630 at minimum. The next probably target comes to around 5880.

It is too soon to say if next leg up has actually started and follow up rally this week is important to conclude that.

In short, as long as Nifty is above 5200 the trend is now firmly up and we can reach near 5490 over short term. Any move below 5200 will indicate the complex correction is ongoing but the latter looks a lower probable scenario as of now!

Waves Capital - Nifty Trading using Elliott wave structure

Waves Capital: (www.wavescapital.com) - Below excerpts are picked up from past Financial Edge short term update and this itself proves how accurately we are measuring the pulse of Indian markets. Write to us on helpdesk@wavescapital.com if you would like to subscribe to this Daily research publication on Indian Equity market.

Nifty Daily chart: 

Published on 7th March 2012 before 8:30 am

Published on 7th March 2012 before 8:30 am: "The fall is overlapping and well defined within the red corrective channel. So structurally this looks like b wave of minor degree is complete and c up shall start. In short, to make things clearer, any move above 5300 will increase the odds of Scenario 2 (positive) is under play…."

Happened on 9th March 2012: Nifty opened with a gap up of almost 80 points on 9th March. Prices opened near 5300 (previous day close was 5220) and closed at 5333 for the day on 9th itself, a move of more than 110 points from previous day’s close.

Published on 16th March 2012 before 8:30 am

Published on 16th March 2012 before 8:30 am: "We have analyzed past history and how prices behave before and after Budgets and it has been observed that most of the time Budgets acted as short term trend changer. The trend had been up from 5180 level to 5500 and we can now be reversing that trend and have probably started wave C down. Decisive close below 5330 – 5350 will indicate next leg down towards 4900 has started."

Happened: Prices broke below 5350 and closed at 5185 as on 26th March 2012.

Happened as on close of 26th March 2012:

Happened as on close of 26th March 2012: The above chart shows movement of Nifty in lines with our wave counts first shown on 7th March 2012. Nifty closed the day at 5185. However the structure has changed lately. Subscribe Now to see what structural dynamics Indian markets are exhibiting.

Write to us on helpdesk@wavescapital.com or visit www.wavescapital.com for subscribing to The Financial Edge report and see it yourself well before market opens what Nifty and stocks are going to do for the day!

Nifty took a "V" turn...

Nifty had a strong day today after Doji formation thereby indicating positivity.

Nifty Daily chart:

Nifty 30 mins chart:

Waves Analysis:

We mentioned in our previous day’s morning report (21st March, 8:30 am) of Financial Edge Short term update, “If a low is taken out of a Doji bar which is currently at 5230 it will indicate bears are in control and downtrend has resumed. If high is taken out which is at 5300, it will indicate bulls are in control. Also a break above 5320 will give positive confirmation above the channel line. It is now imperative to see which way markets want to head. We again re-iterate, a break of 5170 is required to take us towards 4900 levels. Prices have defended that level in yesterday’s trading session.”

Nifty broke the high of Doji day (formed on Monday) and had a good trend up till 5375 levels. The trend looked good with low intraday volatility. There was no hesitation and as seen on 30 mins chart prices constantly formed higher highs and higher lows. The bias is now positive.

5415 level which we have marked before as important resistance level should continue to be the next important hurdle. A close above this level will provide further positive confirmation that wave c of B down has ended in the form of truncation and next leg up has started.

Time-wise the correction in form of wave B does not look complete, after rally from 4700 to 5650 in form of wave A and prices can move in broader range of 5600 – 5200 to complete time wise correction. However this is not necessary and we would have to see the nature of rally from here to adopt this alternate scenario.

From wave perspective, wave c of a-b-c has probably completed at yesterday’s low of 5233 and we have started wave C up which can take prices above previous wave A high of 5650. We will give probable upside target after decisive close above 5415 – 5425 levels.

In short, the bias is positive given the strong up day and next crucial level to watch is 5415 on upside. Any move below 5295 will indicate that the correction is still ongoing.

Suzlon: A journey of 96% fall!

The Financial Edge short term update, is a flagship product of Waves Capital and this report applies Time Cycles, Elliott Waves, Price ROC, other Technical indicators on Nifty and other 3 stocks where we seeing developing opportunity. Write to us on helpdesk@wavescapital.com to subscribe NOW to see what lies ahead for Indian markets!

Suzlon Weekly chart:

Wave analysis:
This excerpt is picked from Financial Edge short term update report published on 13th March 2012.

Suzlon weekly log chart shows a steep fall from the level of 450 in Jan 2008 to 33 in March 2009. The entire down move was impulsive and can be counted as 5 waves. The rally since then has been in complex corrective fashion in the form of W-X-Y and we probably ended wave (B) at 56.

From 56 level prices fell steeply towards 17.20 levels in the form of impulse wave. It is difficult to conclude now if we have completed entire wave C at the low on 7th Jan 2012 or this was just wave i of C. The latter suggest there are more down waves pending and prices can come down to as low as single digits. However if we have ended entire wave C at 17.20, it will indicate the correction from the top at 450 to the bottom at 17.20 is complete and years long bear trend has come to an end. Complete retracement of wave C i.e. a move above 56 will confirm this scenario.

Prices are now lying at crucial resistance level near 34 which is also wave (A) low made in 2009. A break above this can take prices towards upper channel resistance at 43 – 44 from a month horizon.

From medium to long term perspective, we will observe if prices move above 56, it will indicate strong leg up has started and secular trend will then change from down to up. A move back below 17.20 will indicate bear trend in full force and prices can come down in single digits.

Nifty: Inflexion zone!

Bottom Line: Nifty continued the gapping action and rewarding only the positional long traders!

Nifty Daily

Nifty 30 mins

We have mentioned in our previous update, “ We do not think that current trend will be able to exceed above 5540 – 5560 levels, where current up leg shall terminate and next leg C can start taking prices near 4900 levels.”

Nifty came dangerously close to this zone and made a high of 5500 during opening yesterday. We would now advise extreme caution as we might be in later stages of this minute wave c. Also prices opened with a big gap up and filled most of it during the day. If we start correcting down from tomorrow this would prove to be an exhaustion gap.

As seen on 60 mins chart, prices are not able to maintain the momentum and moved out of the trend channel. These are indications of slowing uptrend. However we do not have any negative confirmation and as long as prices are above 5415 the trend can continue further towards 5500 – 5550 zone.

We have also entered into the big event zone and so please trade cautiously and avoid getting whipsawed if big swings happen during monetary policy today or budget session tomorrow. Our advice would be to keep exposure to the minimal in equities and we are reaching inflexion point where the events lined up can act as a trigger to the start of c leg down.

In short, we are cautiously positive since there is no price confirmation to change the bias. As long as 5415 is intact we can move up towards 5500 – 5550 again. A move below 5400 will be first negative sign.

Waves Capital: Crude and Sensex – Inverse correlation a Myth!

By Waves Capital (www.wavescapital.com)

Is there really any inverse correlation between Indian markets and Crude prices???

We are showing Crude (MCX) in INR and Sensex weekly chart which clearly shows how prices of both these asset classes have been moving since July 2008. The chart itself is self explanatory and challenges the logical perceptions of many people who think Crude prices impact Indian stock markets directly and is a culprit for poor performance of Indian equities in 2011.

Crude and Sensex Weekly chart:

We can see that Sensex had started the downtrend in Jan 2008 and Crude joined the party in July 2008. From July 2008 both Sensex and Crude fell in lock step manner and made a low in Feb 2009 “together”.

Since late Feb till November 2010 the rally continued again in a lock step manner and the period of sideways consolidation, from October 2009 to May 2010, had very high correlation. In fact one could have even guessed what Sensex direction would have been during that period by looking at movement of Crude.

This period of high correlation continued till November 2010 and Indian markets again lead like in 2009 and started falling prior to Crude. After 4 months of opposite direction, Crude joined the Indian markets down trend in April 2011 and continued to move in sync till October 2011.

In short, we can clearly note there have been more periods of direct correlation between Crude and Sensex and the facts clearly outweighs the common belief / perception of inverse relation between Indian markets and Crude prices.

For more information on our “Research products”, please write to us on helpdesk@wavescapital.com

Nifty showed volatility at its best but might not be helpful to traders…

Nifty Daily chart: Scenario 1

Scenario 2:

 Nifty 30 mins:

Waves Analysis:

Nifty had a very volatile session yesterday. Markets opened with a gap down and made a low of 5225 very quickly in first 15 minutes. This was actually a confirmation of a break down and shorts would have been initiated at this level. However there was a strong pull back and Nifty rallied to as high as 5375 in less than 2 hours. This up move would have been sufficient to trigger bullish impulses among traders and many longs would have been initiated exactly near the highs of the day. The hopes of bulls were also short lived and the selloff after that was again significant to trigger stop losses of long positions. In short, it was one of the most difficult days for many traders both emotionally and monetarily since swings on either side were sufficient enough to trigger long and short positions as well as stop losses.

It is therefore imperative to have a strict money management strategy in place along with risk management. Such emotionally challenging days will come back again when we have big events lined up – Budget, Monetary policy, etc. It is only after market close, analysis of the day starts and traders start thinking what could have been done differently. Our view is staying away from markets during such eventful days is better but it is difficult to put that into practice. However if staying away is difficult, we do not think it is wrong to get whipsawed on either directions but Risk and Money management is prudent. Also a strategy of close can be adopted and directional bet shall be made during last half an hour of trading to understand the market bias.

As shown on daily chart, we have 2 plausible scenarios. First scenario suggests that wave b of minor degree is ongoing and we can start rallying anytime in form of wave c towards 5450 levels. Scenario 2 suggests that wave c has started and we are headed towards 5000 – 5050 levels from here on. Both scenarios as of now is equally probable to us and we require more technical evidence to suggests which one shall play out.

Scenario 1 looks plausible from bias perspective and the day closed near the low which supports this scenario. Also the bar is big bearish engulfing and so is negative.

Scenario 2 looks plausible as we can see on 30 mins chart, the fall is overlapping and well defined within the red corrective channel. So structurally this looks like b wave of minor degree and c up shall start.

In short, to make things clearer, any move above 5300 will increase the odds of Scenario 2 (positive) is under play and any decisive move below 5180 increases odds in favor of Scenario 1 (negative).

Nifty Sideways action!

Waves Capital (http://www.wavescapital.com/): Financial Edge Short term update - The below excerpt is picked up from Daily report of Financial Edge short term update which shows Nifty predictions on daily basis and what we expect prices to do over short to medium term. Write on helpdesk@wavescapital.com to subscribe or for more information visit http://www.wavescapital.com/.

Nifty 30 mins chart:

Anticipated on 1st March 2012:

Happend:

We mentioned before on 1st March 2012 “Failure of prices to give any followup rally confirms b wave formation as non impulsive. We are moving very well in the channel and so the current down move is corrective. As shown on 60 mins chart, prices failed to retrace the complete of previous wave i.e. c wave of second zigzag in lesser time and so current up move is an x wave and next move down can be in the form of sideways consolidation or triangle. The technical structure shown by Nifty as 1 day down by 150 points, next day up by almost 100 points usually happens when we form triangle patterns. This week we shall continue to see range bound movements with prices coming down again today or tomorrow and moving in a broad range of 5300 – 5450.

Any move above 5450 will increase the odds that the down move is complete and we can again test previous highs near 5620. However unless that happens we will avoid initiating fresh longs and getting whipsawed every other day. Please trade cautiously and in small proportions during such environment and ensure not to lose profits registered during trending moves.

In short, we are looking at range bound movement on Nifty between 5450 and 5300. Any move below 5270 will indicate downward leg has resumed and a close above 5450 will indicate uptrend has started. However latter looks a lower probability as of now and we shall start consolidating in a range!” BANG ON!!!

We have been able to capture the most difficult aspect of market – sideways action. It is very difficult to forecast a sideways action and sideways consolidations are emotionally and monetarily draining if caught on wrong sides during each leg of triangle formation.

We can continue this sideways action for first half of the week to complete remaining pending legs of triangle. Nifty shall then …………………

In short, it is advisable to keep trading positions low and ………...

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