Nifty Trading Strategy...

Strategy for the day:  Due to sideways action our strategy remains unchanged. Existing longs can trail stops to 5665. 

Fresh longs can be created above 5735 with 5665 as stop loss and target of 5790. Shorts can be created below 5620 with day’s high as stop loss and target of 5525…

Bottom Line:The following excerpt is from “The Financial Trading Update” published on 4^thOctober morning before market opened by Waves Strategy Advisors. For more information visit www.wavesstrategy.com or write to helpdesk@wavesstrategy.com

Looking at the charts of Indian markets for past few days, it seems nothing has changed – Nifty continued to move sideways to positive and Midcap / Smallcap have continued to show their strong outperformance…

Nifty Daily chart:

Nifty 60 mins chart:

Wave Analysis:

We have mentioned in the previous update, “In short, as long as previous gap is unfilled on the downside and hold the support of 5665 levels our favored view is positive. Decisive move above the previous high of 5735 will continue the uptrend and it could head higher towards 5800/5820 levels.”

Nifty has continued to move higher with no sign of deterioration as seen from the daily chart. There is no loss of momentum and RSI has been taking support on 70 levels. During strong uptrend RSI can continue to move within the band of 65 and 80. This for us is not an indication of overbought state but a sign of strong up move. We previously saw such action from RSI in February 2012 which was along with spectacular rally in index. We have mentioned about ADXindicator and stated a strong trend can start few weeks back. This indicator also confirmed strong trending move was due which we have seen in month of September.

Lately, the bar size of Nifty has reduced and prices have been moving within a range of 30 to 50 points. Yesterday as well the True range of Nifty had been only 28 points. Even then prices have managed to stay above the prior day’s low on closing basis which is positive.

The Advance decline ratio and high beta sectors continue to show strong outperformance. There are no negative signs from these sectors and market remains in buy mode. 

Bollinger Bands on 60 mins, suggests that prices are currently in consolidation zone. A move below 5710 will indicate Nifty can continue to move sideways for few more days. Any move above 5750 will probably change the band of on upside and trending move shall resume.

In short, as long as the overall breadth remains good one can continue to focus on secondary stocks in high beta sectors. As long as 5660 is intact on downside the trend in Nifty remains positive…

To know the strategy for coming days and weeks on Indian markets write to us on helpdesk@wavesstrategy.com. Do not trade based on news or events but trade based on chart patterns and Elliott waves that helps you take objective decisions even before the news are announced.

Note: Levels mentioned in this report is as per Cash (Spot) market