Does monetary policy drives stock trends? Yes Bank: Elliott wave counts

Does monetary policy drives stock trends? Yes Bank: Elliott wave counts

By Waves Strategy Advisors, For more information visit www.wavesstrategy.com or write to helpdesk@wavesstrategy.com

RBI cut repo rate on 19^th of March 2013 by 25 bps. This was in lines with more than 95% of economists’ expectations and as per mainstreet experts, government focus on easing monetary policy should help in growth pickup.

If repo rate increase or cut would have been responsible for driving prices of Banking stocks up or down then the question to ask is Banking index and stocks have been rallying all the while from May 2012 to Jan 2013 when there was no cut in repo rates. Finally when RBI announced cut in rates in Jan 2013, Banking index made a high of 12960 and reversed exactly on same day from there. This time as well after the announcement of repo rate cut on 19^th March overall market started shedding gains.

This clearly indicates why it is not logical to apply government action to devise trading strategy but to use objective tools like Elliott wave to determine the trend of market. Below article shows how we applied such tool on one of the Banking stocks to capture short term trend –

Elliott wave counts and Head and shoulder pattern were in sync and helped us to capture the top for this stock precisely. Below is the chart picked up from the equity daily report (The Financial waves)

Yes Bank120 mins chart:

Anticipated on 1^st March 2013:

Yes Bank120 mins chart: Happened:

Wave Analysis:

We have mentioned in the previous update of 1^st March 2013, “Along with channel break out it has broke simple moving average of 50 days decisively. As long as 510 is protected on upside our favored view is negative. Move below previous day low of 465 will continue the downtrend and prices can retrace 50% of the prior wave C which comes near 430/425 levels”. BANG ON!!!

Yes Bank moved precisely as expected. Prices reversed exactly from the resistance of 510, broke the crucial level of 465 and made an intraday low of 430 in the previous trading session. Prices have achieved Head and shoulder pattern target which is 50% retracement of the prior intermediate wave C.

Do not rely on others for your trades. Look at the charts for yourself and take informed decisions. Equity research report “The Financial Waves” is published daily and gives research on Nifty along with 3 different stocks.

For more information visit www.wavesstrategy.com write to us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / +91 9920422202.