Nifty in a strong downtrend as expected!!!

The following was published in morning on 25^th February 2013 in “The Financial Waves” equity research report by Waves Strategy Advisors. This report is published daily. To subscribe write to helpdesk@wavesstrategy.com  or call on +91 9920422202 or visit www.wavesstrategy.com

Bottom Line: Nifty failed to give any meaningful bounce after the strong selloff on Thursday. USDINR also looks to have started next trend on upside.

Nifty Daily chart:

Nifty 60 mins chart:

  

Wave Analysis:

We mentioned in previous update, “In short, the trend remains firmly negative for next support coming near 5600 as long as yesterday’s high of 5920 remains intact. Prices can move very fast and avoid creating any long positions unless prices prove us otherwise by breaking above important resistance levels. Enjoy the fire crackers as long as it lasts!”

Nifty moved in a narrow range between 5835 and 5874 on Friday. Prices did not give any deeper retracement after strong fall on 21^st February. As shown on daily chart, we will continue to be bearish as long as prices manages to stay below 20 days Exponential moving average as this has acted as very important support before and now acting as a strong resistance. Also as shown prices have closed below the support of grey trendline that connected previous wave 3 high. Below 5830 the next support directly comes near 5650 levels.

As shown on 60 mins chart, prices consolidated on Friday in flag type formation to digest the fall the previous day. Prices have again closed below the previous pivot low marked as wave (x). X points are important turning levels and as prices have managed to close below it we can expect down move to continue. However move below Friday’s low of 5836 will confirm the resumption within the blue channel as shown.

From wave perspective, we have removed the A-B-C count shown previously since in a zigzag correction wave A should have 5 waves and in a Flat correction wave B should retrace atleast 61.8% of wave A. In current scenario neither is valid as wave A is corrective and wave B has retraced only 38.2% of wave A. This means that prices are moving in a complex correction involving X waves as shown.

As mentioned above currency should also move in sync with equity markets i.e. USDINR should start trending on upside with the current down leg on Nifty. We can see increase in volatility in current week.

In short, our bias remains firmly negative as long as 5920 is intact on upside for a move towards 5650 – 5600. Move below 5830 on downside can result into strong increase in selling pressure.

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