Following has been
published in the morning report “The Financial Waves Short term Update”. To
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Bottom Line: Nifty
had biggest one day gain since 21st September 2012. The trend
remains positive for wave 5.
Nifty Daily chart:
Nifty 60 mins chart:
Nifty Expanding pattern (Alternate scenario):
Wave Analysis:
We mentioned in previous update, “Advance
decline ratio showed improvement and Midcap & Smallcap sectors outperformed
major index the previous day. It will be important to see if the outperformance
can continue today as well. For positive confirmation move above 5650 is
required, which can take prices towards 5690 levels. A close above 5690 will increase
the odds that next trend has started on upside.”
Nifty opened above 5650 level
which was important resistance and showed very good rally throughout the day,
finally closing near day’s high at 5728. We have mentioned before that
important resistance levels are normally taken out with Gap and this time as
well 5650 was broken on upside with a Gap up opening.
As shown on daily chart, prices took support on the channel and Time
cycles showed on Sensex gave 19th November 2012 as possible day of
bottom formation. We mentioned in our 16th November 2012 report, “Assuming
that this 69 days cycle is still working the cycle low date was 7th November
2012. Giving + 8 days leeway we get a date maybe today
or 19th November for an important low to be formed.” The low formed on 19th November
was 18256 and on 20th November was 18255.77. Over past 10 days
prices have not come close to these levels and a very important low is in
place!
Looking at the current advance in Nifty and Sensex it looks impulsive and
as prices have closed above 5700 levels we think wave 5 has started.
First target for this wave 5 is 5950 which is 61.8% of wave 3 and also
other cluster of resistances comes in that zone. We will closely observe how
prices react from these levels. Also in the up move from 4770 none of
the waves out of wave 1 and wave 3 are extended and so there is a possibility
that wave 5 can form an extension opening up target for wave 5 to 6500. However
it is too soon to adopt that scenario as of now and we will wait to see how
prices move near 5950 levels.
As shown on 60 mins chart, prices are in minute wave iii of wave (i) of
5. 5650 which was resistance before will now become strong support and as long
as this level is intact on downside our bias is positive.
Alternate scenario of expanding triangle suggests that the current leg is
wave e and one more leg is pending on downside. However this is a lower
probable scenario as of now looking at the current move that looks impulsive. A
move above 5760 will void this alternate pattern and confirm our preferred
scenario.
In short, our bias is positive
and wave 5 has probably started on upside for a move towards 5950 with 5650
acting as important support level.
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