Nifty in final stages of up move since 2008!!!

As Published in The Financial Waves short term update morning 8.30 am by Waves Strategy (www.wavesstrategy.com)

Bottom Line:Nifty continues the downward bias as long as the previous bar high of 5345 is intact on upside.

Nifty Daily chart:

Nifty 60 mins chart:

Wave Analysis:

We mentioned before, “…If the entire wave 3 is over at the top of 5450 then the current leg is wave 4 and wave 5 will be smaller than wave 3 giving the final target of the entire up move that started from 4770 as 5550. Next few days of price action will tell us if wave 3 is indeed over and 4^th is ongoing or it is wave b of 3. Either ways there is not much steam left in Indian markets and once the up move gets completed near 5550 – 5650 there will be a steep move on downside back towards 4770 levels….In short, the bias for Nifty is negative with immediate support lying near 5290 and resistance at 5360 levels”

As expected a move below 5350 level took Indian market towards 5290. 5350 level which was support before acted as resistance and prices failed to move above 5345. The selloff was seen throughout the session and index closed near the lower end of the day near 5290 levels. We have mentioned before this as the next support level and prices closed exactly on that support.

The odds have increased now that the up leg that got over near 5450 was complete wave 3 and 4^th wave is ongoing. If this is valid then, in Ending diagonal pattern 5^th leg is normally going to be smaller than 3^rdleg both time and price wise.This reduces probable target for 5^th leg now towards 5450 to 5550 levels. The deeper this current leg corrects previous up move the lesser is the chance for 5^th wave to go towards higher end of the range which is near 5550 levels.

The selloff has been visible in high beta sectors and this is typical during such pattern formation. The bigger index shows less movement but the underneath breadth and momentum keeps deteriorating. Food for thought: the stocks that already look to be at beaten down levels can see serious capitulation as the index also starts moving down once the up move gets completed?

The only hope looks to be the banking sector which still hasnot started the 3^rd leg (corrective 3^rd leg since it might also be forming an ending diagonal pattern or probably triangle).

Over near term as shown on 60 mins chart the bias continues to be negative as long as 5345 is intact on the upside and prices continue to move within the red corrective channel. The strong support is now near 5250 - 5260 level which is also the previous gap up zone. Wave 4 can terminate near this level.

In short, the medium term trend is now in late stages of up move and the bigger leg down might start sooner than expected. A move above 5600 will force us to adopt alternative possibilities else expect the trend to terminate anywhere between 5450 – 5550 levels. We are watching the movement very closely and we will warn as soon as we suspect end of larger degree up move…

Short term view on GAIL

Below article shows GAIL moving in a downtrend channel and is now lying near the upper end of the channel. Chances are high it will continue the downtrend and will take resistance at current levels. 

However almost 70 to 80% of the stocks move along with major index Nifty and from trading perspective it is extremely important to know the direction of major index. This is just 1 stock picked up from the "The Financial Waves Short term update" report. The report shows direction of Nifty and total of 3 stocks based on opportunities and charts. Learn and Trade is the best investment you can make. Write to us on helpdesk@wavesstrategy.com to subscribe to this report and learn the practical application of Elliott wave in confluence with other basic technical tools.

GAIL Daily chart:

GAIL 120 mins chart:

Waves Analysis:

As shown above in daily chart of GAIL, since December 2010 prices continuously moved lower by forming lower tops and lower bottoms in the red channel and made a low of 300 in the month of May 2012.

As shown above in 120 mins chart, recently prices took resistance near upper end of the blue channel and drifted lower. Also momentum indicator MACD exhibits the negative divergence accompanied by low volume (shown above in daily chart).

In short, as long as ............ is intact on the upside and prices move within the red channel bias is negative over short term and prices could drift lower towards 350 levels. Further move below this ..........can then move to .......

Contact information: Email:     helpdesk@wavesstrategyadvisors.com, Follow us on Linkedin / Facebook / Twitter: Waves Strategy Advisors

Natural Gas: Elliott Wave Counts

Bottom Line: Elliott wave counts can be applied not only to widely known commodities but works very well even on less followed commodity like Natural Gas. Prices have been moving exactly as per the wave counts shown in the below chart.

To view wave counts of precious metals like Gold / Silver or base metal – Copper or Energy – Crude oil, subscribe to “The Commodity Waves” – a research report published on daily basis that shows Elliott wave counting on all of these asset classes and you also get to learn practical way of applied Elliott wave analysis.

MCX Natural Gas Daily chart:

MCX Natural Gas 60 mins chart:

Waves Analysis:

As shown above in daily chart of Natural Gas, prices have been completed impulsive 5 wave in the year 2009, thereafter since last three years (2010-2012) prices moved down in blue channel in a complex corrective pattern (w-x-y-x-z).

As per wave perspective, we might have completed the minute wave x of (b) of (B) and currently prices have started the next leg on downside in the form of minute wave z of (b) of (B).

From Medium term perspective, we are firmly bearish on this commodity. 180/185 will act as a strong resistance and 100/90 will act as good support.

In near term, any attempt on the upside will find strong resistance near 160 levels and eventually it should drift lower. Break of 150 will confirm the downtrend and prices could head lower towards 135/130 levels.

Contact information: Email:    helpdesk@wavesstrategyadvisors.com, Follow us on Linkedin / Facebook / Twitter: Waves Strategy Advisors

Nifty: The power of “Channels” in technical analysis….

Nifty: The power of “Channels” in technical analysis….

Channeling is one of the most basic technical analysis concepts. Generally, a parallel line to a trendline is drawn to form a channel. A Channel is bound by upper and lower trendlines that usually acts as supports and resistances. From trading perspective even when using advanced concepts like Elliott wave applying this basic technique becomes extremely crucial.

Channels to a novice trader is overwhelming but when one gains the experience and starts learning advanced concept of technical analysis, channeling seems mundane.  However this one simple technique if applied properly is sufficient enough from trading perspective.

Below is the chart of Nifty showing the how accurately and beautifully prices have been taking support and resistances on the channel.

From trading perspective, identify the direction of the channel................... to read more click on this link: NIFTY: THE POWER OF “CHANNELS” IN TECHNICAL ANALYSIS….

or go to www.wavesstrategy.com, Trading and Education section 

Nifty moving up on slower momentum!

Bottom Line: Nifty continued to give a close above the previous day’s low, bias is positive as long as previous day’s low remains intact on closing basis.

Nifty Daily chart:

 Nifty 60 mins chart:

Wave Analysis:

We mentioned before, “…In short, as prices managed to move back above the 5400 levels we are cautiously positive as long as 5350 is intact on downside with strong resistance coming near 5500 levels.…”

Nifty has been constantly managing to close above the previous day’s low. As long as prices are managing to move this way our bias is cautiously positive.

As shown on 120 mins chart, prices are sticking on the lower end of the channel which was acting as very good support before. Now this channel is acting as resistance to prices. RSI is constantly giving negative divergence and so we remain cautious on the current up move. However indicators are always secondary and should not be acted upon unless there is price confirmation. Many of the traders commit a mistake of acting as soon as indicators give any signal. Trading based on indicator is not advisable as the negative divergence can lasts for months and prices can keep going higher. Case in point is if indicators are giving negative signals one should be cautious but should act as soon as confirmation is obtained from price.

From wave perspective it is difficult to say if this is only wave a of c or complete wave c. If the current rally extends towards 5500 chances will be high that the current up move is complete wave c.

In short, a break below 5400 will be first negative confirmation followed by move below 5350. As long as these levels are intact bias will continue to be cautiously positive.

Nifty long to medium term wave structure

Nifty Long Term Wave counts -

Nifty Weekly chart:

Wave Analysis:

Long to Medium Term analysis:

We are showing Nifty weekly chart that shows the long term wave counts of Indian equity markets. Since the start of 2008 prices have been moving in complex corrective pattern. The entire wave down from the top of 6357 to 2253 has formed the first leg [W] of this complex pattern. The move up since then from 2253 to the high of 6339 is wave [X]. We were expecting this entire rally as impulsive before but looking at the time taken for this up leg to retrace the complete of down move of 2008 makes this leg as wave [X] more probable. Prices are currently in primary wave [Y] of complex correction and has so far completed only intermediate wave (a) on downside. The up leg (b) (shown in detail on daily chart) is forming a flat corrective pattern on upside. In this intermediate wave (b) prices have so far completed minor degree wave a and b and is now in wave c. Minor wave c should be forming an Ending diagonal pattern which we discussed in previous updates. Once this wave c of (b) is complete on upside near 5600 – 5650 levels the next leg down shall start. A very important top should be in place latest by September end this year. This can also be an important top which will not be exceeded by mid 2013.

In short, prices are in very matured state of up move since the bottom of 2008 and a turn is imminent very soon!

Nifty in Ending Diagonal pattern

Bottom Line: Nifty closed at the highest level after March 2012. Prices are now in wave 3 of Ending Diagonal pattern.

Nifty Daily chart: 

Nifty 60 mins chart:

Wave Analysis:

This article is picked up from The Financial Waves report published by Waves Strategy Advisors Pvt. Ltd. on daily basis. To subscribe to this research write on helpdesk@wavesstrategy.com or visit www.wavesstrategy.com

We mentioned in previous update, “Nifty 60 mins chart is showing very good respect for the trend channel. Prices have been taking good support on this channel and is bouncing back. A move above 5378 will form a higher high and higher low formation and will indicate positivity… In short, strength above 5370 – 5378 will be bullish and a move below 5310 – 5300 will indicate sideways action to continue further.”

Nifty continues to take strong support on the blue channel shown on 60 mins chart. Also prices have managed to close above 5378 which is the highest level seen since March 2012. The formation continues to form higher highs and higher lows. All this indicates that the next leg up has started.

Looking at the wave structure and failure of wave 2 to take sufficient time suggests that this wave C up is forming in an Ending Diagonal (Wedge) pattern. Ending diagonal pattern is an Elliott terminology for a wedge shaped structure. This pattern is a different impulsive pattern where all legs are corrective and wave 4 overlaps with wave 1. Also prices constantly lose momentum on the way up. Wave 3 in case of Ending diagonal is usually 61.8% to 76.4% of wave 1. This gives a range for current leg up in wave 3 as 5500 – 5530.

Daily chart shows the probable path we expect for Nifty to follow. Wave C of this flat correction upside which started in January 2012 will probably end sometime in last week of September. Once this wedge pattern is complete the next big leg on downside will start which will retrace complete of this wave C i.e. prices will move towards 4770 in probably 25% to 50% of the time the entire up move from 4770 to 5650 will take.

Over short term the trend remains positive as long as the blue channel shown on 60 mins chart is intact i.e. as long as 5330 is intact on downside. Prices are currently wave a of wave z. Wave z can be equal to wave y and the target comes near 5530. This is the same level where bigger degree wave 3 is equal to 76.4% of wave 1 (shown on daily chart).

To simplify the complexity of wave theory – prices are probably forming a wedge pattern with target of wave 3 coming near 5530 and final target of around 5600 – 5650 levels. This will complete the upside correction and bigger degree down move shall start.

In short, near term trend is positive as long as 5330 is intact on downside and prices can move towards 5500 – 5530 levels. 

Assam violence protests & Stock markets

Violence in different parts of India is only a sign of negative social mood across the country. Stock markets measure this social mood and moves in a patterned way which is predictable. This patterned behavior of market is measured using Elliott Waves.

This study of Socionomics has been coined by Elliott Wave International and we are extending that study to Indian context.

The social mood has been negative for quite sometime and stock market is also reflecting that. Indian markets had been moving sideways to down after making in high in February 2012 at 5630. It made a low of 4770 in June 2012. Stock market is the leading indicator of economy and reflects the mass psychology.

People normally think it as the other way around and expect stock market to move up or down after GDP data or IIP numbers. But please understand markets are always discounting what can be expected in future and the economic numbers that are coming out is of the past what has actually happened.

Elliott wave patterns help to look at what we expect the future to be and if social mood is going to go more negative or is turning positive.

The recent Assam and Myanmar violence protests at Azad Maidan - Mumbai, Pune and different parts of country is in a way reflects frustration and negative mood among the public at large. This is also a delayed response that we see in realty. Stock market is a direct reflection of this social mood and the move down from February 2012 to June 2012 was leading this event. Major bottoms are often followed by violence of a large scale, current one can be simply a small reflection of minor bottom formed in June 2012.

Write to us on helpdesk@wavesstrategy.com to know what Elliott wave structure is telling us for Nifty and social mood.

SBI downgraded by UBS but the Elliott wave structure showed us the leg down is imminent 3 days prior...

SBI downgraded by UBS but the Elliott wave structure showed us the leg down is imminent 3 days prior to this down fall after SBI reuslts…

(Reuters) - UBS downgraded State Bank of India to "sell" from "buy", saying a weak monsoon would add to its "already high" non-performing loans, while expecting margins to decline due to rising cost of funds and potential cuts in the lending rate.

The stock fell 4.5 percent to 1,968.75 rupees on Thursday, its biggest daily percentage fall since February 22, because of worries it would report disappointing earnings.

SBI Elliott waves research clearly showed us that atleast one down leg is pending. The below article was published in morning of 8th August 2012 before the markets opened and SBI was quoting at 2060 before the opening. As of now SBI is having steep sell off and is moving down as we quote.

The below chart of SBI show what has happened and why we were bearish on this stock by looking at the Elliott wave structure.

SBI Daily chart:

Published on 8^th August 2012 before market opened quoting at 2060

SBI Daily chart as on 10^th August 2012, 12:45 pm, currently quoting at 1910

Wave Analysis:

As shown in the daily chart of SBI, prices have breached the blue channel on downside. We have completed Wave x at around 2250 levels and have started the first leg of wave y on downside. Wave Y can now be a zigzag or a flat correction and can move below Wave w.

Previously we have shown a possibility of impulse wave on upside. But however we showed that the up move is overlapping and non impulsive. Break of prices below 2100 confirms that the up move was only wave x and not start of new leg up. Prices are still moving in second correction of wave B.

We can observe in 120 mins chart that prices are now in wave b of wave y. A move below 1950 will confirm that wave c has started down towards ……..

Write to us on helpdesk@wavesstrategy.com or visit www.wavesstrategy.com  to see what Elliott wave structure tells us about the future path of this Banking bellwether… 

Nifty closing below 5350 will indicate short term bearishness...

Bottom Line: Nifty made a high of 5350 exactly near the strong resistance level. It is crucial to see how prices react from here!

Nifty Daily chart: 

Nifty 60 mins chart:

 Wave Analysis:

We mentioned in previous update, “In short, bias is positive given the sustainability of the gap yesterday. However, the up move can be limited to 5340. Even if this is the start of next leg up there are cluster of resistance levels coming in that region and prices will have to consolidate below that level before it can break above it. It will be vital to see how prices react from the resistance zone of 5310 – 5340 for the trend ahead.”

As expected prices had a follow-up rally yesterday and made a high of 5350. However during final trading hour prices failed to close above this level and closed at 5337. As we have mentioned before 5350 is a strong resistance level. Following are the reasons why we think it is strong resistance: this level is the previous pivot top where wave i ended, the resistance of Bollinger Bands® as shown on daily chart, strong channel resistance as shown on 60 mins chart, second pattern (a)-(b)-(c) is equal to first corrective pattern (a)-(b)-(c) at 5340, RSI is in over-bought region.

All the above mentioned reasons make us think that 5350 will not be taken out on upside atleast for few days and prices can move down towards 5200. However we are now lying dangerously close to this level and if prices manage to gap up and close above this level of 5350 then we will be forced to adopt the stand that the next leg up has probably started.

From trading perspective the current market continues to exhibit a challenging environment for both sides of players. Preserving capital should be the aim during such market structure and patience shall be rewarded once a clear wave structure emerges.

For now if 5350 is protected on upside we expect a move down towards 5200. A close above 5350 will indicate that the next leg up has started. 

Nifty to continue sideways action...

Bottom Line: Nifty continued to move in a narrow range. Prices shall continue to move this way atleast for 1 to 2 weeks before any directional move…

Nifty Daily chart:

Nifty 60 mins chart:

 Wave Analysis:

We mentioned in previous update, “In short, the bias is positive over short term as long as 5210 is intact on downside. The immediate resistance is now at 5250 – 5270 levels.”

Nifty made a low of 5209.95 and bounced back from there. The lower level of 5210 has been very accurate. Prices had a minor gap down opening and failed to enter into positive territory throughout the day. Also as shown on 60 mins chart prices have moved out of the channel. Given the weakness in global markets Nifty can have a gap down opening around 5200 levels. It will be important to observe if prices can defend the support of 5190 level. A move below that will indicate that the b of B has started which will last for around 5 days. And can take prices towards 5110 levels.

Indian markets can be challenging for trend followers over short term. It is important not to lose patience and the bigger picture which is still bullish as of now and once this corrective wave ii ends next leg on upside towards 5600 can start. However it is important that this wave does not take prices below 5000 level.

In short, a move below 5190 can take prices towards 5110 levels. Any move above 5230 will take it towards 5260 – 5270.

RBI Monetary policy...

RBI’s action was no surprise to us. Infact 12 month Bond yield helped us to predict there will be no rate cut in the monetary meeting held on 31^st July 2012.

The below research was first shown in our Equity Financial Waves report published on Monday morning before markets opened. For more information write to us on  helpdesk@wavesstrategy.com or visit www.wavesstrategy.com 

Bottom Line:RBI monetary policy eyed by most of the traders to determine if there will be repo rate cut announced that can act as positive trigger for stock market…

12M Government Bond Yield:

Chart courtesy: Bloomberg

 The above chart is of 12 Month Government Bond yield. We have analyzed this yield for past years and noted that this Bond yield normally leads the government actions on repo rate. We can see that the repo rate cut by 50 bps on April 17 was indicated before itself. The bond yield fell from 8.40 levels to 8.10 level prior to the rate cut was announced. On June 18, when no rate cut was announced Bond yield was hovering around 7.90 levels. Currently as well the 12M bond yield is at 7.93 levels which indicates there will probably be no repo rate cut by RBI in the meeting scheduled on 31^st July 2012.

On June 18, Nifty opened almost 40 points higher at 5174, made a high of 5190 and when no rate cut was announced market reacted sharply lower towards 5041 finally closing at 5064. There was a swing of 150 points on intraday. As per wave structure, market was in corrective mode then. Currently as well Nifty is moving up in corrective minor wave b and similar behaviour and volatility can be expected.

If the bond yields would have been around 7.5 to 7.75 levels we would have been optimistic about rate cut but the above chart is indicating otherwise.

Please note the future is probabilistic and based on the assumption that the above bond yields are tracking government actions closely. This research shall be used only as a caution sign and actions should be taken on price confirmations…