Wednesday, January 2, 2013

Nifty started the next leg on upside!

Bottom Line: Nifty had highest close in almost 2 years. Prices look to have started the next leg on upside!

Nifty Daily chart:

Nifty 60 mins chart:

Wave Analysis:

We mentioned in previous update, “As per wave perspective, prices are in the final leg of impulsive wave and currently it is about to complete minor wave ii of 5 and it could start the next leg on upside in the form of minor wave iii. Positive confirmation will be obtained above 5950 levels….”

Nifty had a strong gap up opening of almost 30 points and managed to sustain the gap throughout the day. We have been mentioning the importance of 5950 levels since more than 2 months and prices have finally managed to close at 5951. This is not only the highest close after consolidation started in wave ii of 5 but also the highest close in almost 2 years. The previous such level was seen in January 2011. 2013 looks to have started with positive signs but we continue to believe this to be the final leg of rally before the downtrend begins. However it is better to position ourselves in direction of channel which is up and enjoy the positive trend as long as it lasts!

We mentioned in our report 2 days back that any gap up opening which lead prices above 5925 shall be used as buying opportunity with the gap area i.e. the previous day’s close as stop loss. Prices opened near 5938 levels yesterday and managed to defend the opening levels throughout the day. The intraday range continued to be small of just 25 points indicating no anxiety by traders after gap up opening.

The advance decline ratio was largely in favor of advancing stocks with around 1900 stocks advancing against only 980 declines on BSE. Midcap and Smallcap indices also showed strength further confirming that index has probably started the next leg on upside.

Bollinger Bands® as shown on 60 mins chart has turned up along with prices after almost a month long consolidation which further adds to the fact that new trend might be beginning. However a follow-up action today will be very important to observe.

Since primary wave 1 and wave 3 of wave C were almost equal we remain aware that wave 5 can be extended and can move towards 6400 levels. However since prices are currently in 5th leg of wave C of a flat correction which started in January 2012 we will not be overly optimistic and would keep 6100 as first target for this leg up.

Positional traders can now start using trailing stop method and can now trail stops on long positions towards 5890 levels.

In short, our bias is now positive on Nifty with 5890 as important level on downside. If prices fill the gap created yesterday it will indicate wave ii is still ongoing. Follow strict risk management and money management rules in case we are reading the market waves wrongly!

Below was published in Financial Waves short term update research report by Waves Strategy Advisors. For more information to subscribe and see Nifty on daily basis as wave counts develop write to or visit

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