Nifty at crucial juncture!

Below is as per the report published on 6th September morning before markets opened : "The Financial Waves" by Waves Strategy Advisors - www.wavesstrategy.com. This is from the daily report. Write to helpdesk@wavesstrategy.com for subscription details.

Bottom Line: Nifty continues to drift lower failing to take out previous days high. Bollinger Bands® are giving important information….

Nifty Daily chart:

  Nifty 60 mins chart:

Wave Analysis:

We mentioned before, “…In short, a close above 5300 along with increase in breadth of the overall market will be first positive sign over short term for a move towards 5450 - 5500. As long as this does not happen expect a range bound movement between 5210 – 5290.”

Nifty had a gap down opening and prices failed to close the Gap during intraday. As we have mentioned before there is no positive confirmation yet and prices have come close to the lower end of the range at 5220.

The trading strategy at this point of time depends on individual trader’s risk appetite and temperament. More aggressive trader can prefer going long at current levels with 5200 as important stop. The risk reward favors here but price confirmation does not. The other set of traders wait for price confirmation technique to ride the trend once it starts. It is important for an individual to define a trading strategy that suits his personality – A reversal trader or trading based on price confirmation!

Bollinger Bands is providing important information as shown on daily and 60 mins chart. Daily chart shows that prices have given spike below the lower end of the Bollinger Bands for the 3^rd time since the bottom of 4750. Prices have recovered twice before and it is important to see if prices can bounce back this time as well. If prices continue to move down from here it will change the direction of lower end of the Bollinger Bands to down which will carry bearish implication.

As shown on 120 mins chart, since the fall started from 5450 prices have been trying to move above the midline of the band lately. This indicates loss of momentum on downside. The trend has now changed to sideways. Yesterday’s close retested lower end of the Bollinger Bands on 120 period data. A move below 5200 will turn this band also to downside which will be strongly bearish. If prices have to bounce back it has to be from current levels else risk of serious down move can rise.

In short, we expect that the level of 5210 should not be broken on downside for the next leg to start on upside. However, first positive price confirmation will be obtained above 5270 levels. A break below 5200 will increase the risk of trend to emerge on downside. However the probability of latter is low as of now.