Friday, September 14, 2012

Nifty: A boost of QE3!!!

The following was published in "The Financial Waves" daily report by Waves Strategy before market opened today... To know what will void the current wave pattern of Ending diagonal and what we expect of RBI monetary policy on Monday Subscribe and see this in next report which will be published on Monday morning. Visit or write on to subscribe... 

Bottom Line: A boost of QE3 announced yesterday by FOMC US to give a positive dose to Indian markets as well…

Nifty Daily chart: 

Nifty 60 mins chart:

 Wave Analysis:

We mentioned before, “…Existing long positions shall now trail their stops to 5390 levels. A move below this level will be first negative sign.In short, the bias is cautiously positive as long as 5390 is intact on downside. Watch carefully how prices react from 5450 to 5500 levels.”

A boost of QE3 announced yesterday by FOMC US to give a positive dose to Indian markets as well… QE3 is bond buying program by FED to induce liquidity in the system and give boost to the economy. QE3 of worth $40 billion is worth enough to give atleast short term rally to global equity and commodity markets. After the announcement US markets were up by more than 1.5% and Asian markets are following it. Commodity as well as bullions saw strong move up.

This is driven by event and should be short lived. However liquidity can always delay the topping process and US government has succeeded in doing that over past 3 years.

Case in point: Expect a strong Gap up opening in Indian equities as well today based on yesterday’s event. Nifty can open near the upper end of the range of 5500. This is going to be 3rd gap in this up move and short term indicators are already over bought. It will be very important to see if the Gap is sustained for the rest of the day. Failure to do that will be strongly bearish.

Any close above 5510 will open up possibilities for 5600. For now the strategy for existing long positions should be to trail the stops to yesterday’s close. This strategy will help to capture the trend till it runs its course and if we are incorrect about the current pattern the trend is not missed. Fresh longs should be avoided as the risk is very high as of now. Aggressive traders can build short positions if Nifty fails to sustain above 5500 but conservative traders should wait for closing of Gap. Please understand excess liquidity can push markets beyond the specific point for extended period. The bias is positive and there is no negative confirmation. We have been telling this since the trend started. We will mention it here wheneverprices give negative confirmation. Trading strategy should be based on individual’s risk appetite and money management techniques.

In short, look at how prices react after the Gap up opening today. Also RBI monetary policy on Monday can increase the volatility.. Trade cautiously!

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