What is long term charts of Reliance Industries, Sensex, Gold, DJIA, USDINR suggesting?

By Waves Strategy Advisors, For more information please visit www.wavesstrategy.com

From investing and trading perspective it is necessary not only to look at short term charts but to also align oneself with what the long term trends are suggesting.

It is imperative to know when the long term trends are about to reverse so that the surprise element is not there and people do react along with newswire that this was completely unexpected. Markets tend towards surprising majority of the crowd and it is upto us to evaluate all plausible scenario systematically to derive the highest probable outcome.

The below is a brief of what our “The Financial Waves” monthly report is showing:

India continues to stand independently in the Global markets with Indian currency the worse performing asset class among Asian peers. Prices of Gold has touched life time highs in terms ofINR as the currency hits life time lows i.e. USDINR made life time highs. Equity market continues to be in strong downtrend and is moving in the down wave which was pending before finally bottoming around mid of 2014.

In this research we have explained why the rally in Gold is only localized and not Global. Gold in terms of USD has so far not even retraced its high made in May 2013, let alone the highs of 2012 and 2011 when Gold topped out at $1900. Also a true rally in Gold happens when it rallies against all the major currency and does not exhibit a local phenomenon due to domestic currency.

Indian currency crisis: When the currency was at 55 we have updated about impending currency crisis and the mainstream experts are realizing it now.  Also the selloff in currency clearly explains why government interventions does not change the major trend but produce only short term spikes. If government actions could have changed the trend then Japan would not have faced more than 2 decades of deflation!

Food security Bill is said to be the main culprit for depreciation in currency and economic instability as the bill will cost 1.30 lakh crore. We do not rule out the fact that it is a huge subsidy bill which is announced exactly at the wrong time but this does not justify the sharp selloff in Equity and Currency. The trend on downside in Equity was due which we are seeing now and the fundamental logical explanation will keep coming as and when market keeps falling. Also remember the most bearish fundamentals come exactly when the market is at the bottom. However, news cannot be used to do objective trading but Elliott wave along with Time cyclesprovide the details on how matured the current trend is and what to expect next.

DJIA continues to fail around 15500 – 15600 levels and has fallen by more than 900 points from the top. Drop below crucial level mentioned below over next 2 weeks will confirm that the major trend in DJIA has probably changed from up to down. A synchronized move across world markets will always provide better trending moves.

Reliance Industries was one of the leading stocks in the bullrun from 2003 to 2008. This stock has been a major underperformer since then. However, Reliance Time cycles shown below also suggest the major bottom should be formed by ……...

To get insight into this Monthly update please visit  http://www.wavesstrategy.com/index.php/store.html and subscribe to the long term trends showed in “The Financial Waves Monthly Update”. For more information write to us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / +91 9920422202

Useful for: Long term traders, long term investors, elliott wave, Equity traders, technical analyst 

Related to: Equity market,Reliance,Sensex,Gold,DJIA,USDINR,currency,Elliott wave,technical analysis,long term analysis

Sensex Time Cycles, Elliott wave, Channels and Indian bear market on strong footing!

Sensex Time Cycles, Elliott wave, Channels and Indian bear market on strong footing!

By Waves Strategy Advisors. For daily subscription details visit www.wavesstrategy.com

On 16^th August 2013, Nifty and Sensex registered one of the biggest falls last seen during the bear market of 2008.

Sensex 69 days topping cycle coincided exactly with 16^th August, the day of big fall!

Sensex Time Cycles:

Sensex 69 days topping cycle: The fall of last Friday, coincided exactly with 69 days Sensex topping cycle. We have been showing this cycle since past few quarters and this time prices turned exactly on cycle day. However, the short term indicators and price action 2 days prior to 16^th August did not suggest that the turn is near. Prices closed near day’s high on 13^th and 14^th August and did not retrace even 50%. Cluster of evidences definitely provides more weightage to Time cycles and its importance. Also the fall was so steep that the reaction time was extremely less for a trader to act in non impulsive fashion. Nevertheless we will be closely observing this topping cycle and its next date is now near 19^th November 2013.

Nifty 60 mins chart:

Elliott wave counts are purposely removed from above charts shown in daily morning reports.

Over past 3 days we have been constantly mentioning, “In short, 5480-5500 continues to be important level to watch on upside.

Also as previously mentioned the down move from 5500 to 5268 took 9 bars and prices consumed total of 11 bars so far and is still not able to take out the level of 5500 which indicates that the trend still continues to be negative. In the entire fall from 6100 not a single swing or wave is taken out in faster time on upside. This one simple technique is sufficient to indicate that the trend remains negative. However during down moves there will always be minor corrections on upside which is happening currently.

In today’s morning “The Financial Waves Short term update” we mentioned over short term, 5500-5550 will act as an important resistance zone. Slower retracement, Bollinger Bands®, Elliott wave counts and falling channel suggests limitation on upside.

In short, move below ……………. will provide the negative price confirmation and confirms the end of correction on upside and resume the downtrend towards …………. levels.

For many the intuitive feeling is this is extreme but it is markets that decide the extremities and not individuals. It therefore becomes imperative to use objective tools like Elliott waves, Bollinger Bands, Channels, Time cycles that helps to understand what is the major trend of the market and why the current market is sell on rallies mode. “The Financial Waves” daily research report applies this techniques on daily basis on Nifty and 3 stocks. For subscription visit http://wavesstrategy.com/index.php/store.html

Useful for: Trading Nifty and Sensex, Positional traders, Research reports, Elliottician, Learn technical analysis

Related to: Elliott waves, Bollinger Bands, Time Cycles, Channels, RSI, Support, Resistance, Technical analysis

Trading Elliott waves: Nifty bigger trend continues to be down but short term pullback is possible!

Following article is picked up from today's morning report "The Financial Waves" by Waves Strategy Advisors. For daily research subscription please visit http://wavesstrategy.com/index.php/store.html

Bottom Line: Nifty had a strong negative close after Gap up opening but prices reversed from the zone of 5480 – 5520!

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

In the previous update we mentioned that “In short, as the larger trend of the market is down it is better to adopt sell on rallies strategy and also keep stoploss at sufficient levels to take care of volatility. On upside 5480 followed by 5550 will be important level to watch and move below 5340 will continue the downtrend.”

Nifty had a strong Gap up opening of more than 90 points near 5495 levels. Prices made a high of 5504 and failed to retest that level again during the day. Post 1 pm the selloff pressure intensified and prices moved below previous day’s low of 5300.

In previous update itself we mentioned that, “During such high volatility environment it is prudent to have good risk management and money management strategies designed before the market opens in order to avoid any impulsive reaction to market movements. For example: A Gap down of 60 points would have resulted into strong selling emotion exactly at the lows and when the Gap was covered which was indeed minor positive sign would have resulted in creating longs but only to lose on both sides. Even if you are placed on the right side of the market it does not necessarily mean making money would be easy since volatility is going to be high.”

The reason for re-mentioning the entire para from previous update is that yesterday again the same thing happened but on opposite direction. Nifty had a Gap up opening of 95 points probably creating strong positive emotion exactly at the top and when the gap was filled and prices moved lower near previous low of 5300 one would have gone short but only to see that there is channel support near that level. This would again stop out both longs and probably shorts if there is a positive move again tomorrow.

From trading perspective it is therefore better to wait for prices to reach near the upper end of the channel or atleast show some time correction if not price correction before creating any short position. We re-iterate that the bigger trend of the market is down and any pullback towards crucial resistances should be used as selling opportunity rather than buying for short up moves!

The daily RSI has now arrived near 30 levels from where prices have reversed many times before over past 1 year but the difference is that the previous major trend was on upside and currently it is on downside. Nevertheless this still shows that short term bounce back cannot be completely ruled out. As shown on 60 mins chart, the low made yesterday is exactly on the lower trendline at 5270. Also there is one minor positive divergence. During strong downtrends we have seen channels and divergences failing but we cannot assume beforehand that it is not going to work. The reason for making such contradictory statement is that the situation is not ripe for fresh shorts as of now and there are times when one has to wait before pulling the trigger for a good trading setup.

Over short term, for selling pressure to intensify prices have to break below 5250 early during the trade and then should not show any attempt of bounce back. If that does not happen we can expect some attempt on upside again towards 5400 levels.

In short, the major trend of the market is down and any pullback should be short in terms of price and more in terms of time. 5250 is now next support on downside and 5450 can now act as good resistance. 

For more information on daily research in Equity, Commodity and Currency visit http://www.wavesstrategy.com

Sensex registered biggest down fall since 2009 but Why blaming FED, Rupee, FIIs???

Sensex registered one of the biggest falls since 2009, 18300 will be crucial on downside.

Sensex had a Gap down opening of around 70 points on Friday and prices failed to take any support near important levels. The selloff intensified during the 2^nd half of the day and Sensex lost exorbitant 770 points or almost 4% by the day end. This was real carnage seen across the Indian equity market. BSE Midcap and Smallcap indices lost around 2.7% and 2.15%. The advance decline ratio deteriorated with 713 advancing against more than 1600 declines. However, this is still not extreme breadth figures we have seen but nevertheless it is still very poor. Negative closing of such severity was last seen on 6^th July 2009 when Sensex registered a fall of 870 points. Prior to that selloff of such magnitude was seen in bear market of 2008. Many people are now realizing the bear market in India after index has shown its weakness but we have said this before as well that Indian equity market is already in a big bear trend since many months as Advance decline line has constantly deteriorated. Sensex is now only witnessing the selling pressure which has been happening in broader market for quite sometime.

Sensex daily chart: 

USDINR future hourly chart:

There are many logical explanations that are coming after the severe fall registered on Friday which looks logical on face value but are unjustified. Without any major event during the day, Rupee has been facing all the blames followed by US FED and rumors of FIIs moving out of India.

Blaming the Rupee?

USDINR (futures) made a high of 62.18 on Friday against registered 61.79 on 8^th July. On 6^th August itself INR touched 62.12. Friday’s depreciation in currency futures was mere 6 paisa above 6^th August and 39 paisa above the high of 8^th July. I am astonished to see without any other event plausible to blame it is the Rupee that is facing all the heat! Also there can be confusion in the causality here. It was previously believed that fund flow into Indian equity market supports Rupee but this time Rupee is said to be the reason for equity selloff. I do acknowledge the fact that INR weakness makes it unfavorable environment but it is not the sole reason to blame for equity selloff.

If Rupee depreciation is the prima facie reason for weak equity markets then food for thought is why did Sensex moved from the lows of 7700 in October 2008 to the level of 20350 just few weeks back and Rupee also moved from 39 level to 62. The counter argument for the INR critics can be that it has moved way beyond expected levels impacting CAD but who decides what is extreme!!!

Blaming FIIs selling?

 FIIs have been net buyers to the extent of $260 mm so far this month. Now this needs little explanation. FIIs infact sold more than a billion dollar in June and July individually!

Blaming the FED?

This is a very incorrect excuse. US markets are still near their life time highs and infact, DJIA touched all time high on August 2^nd which is well after FED first hinted about scale back on 22^nd May 2013. The stimulus by US, for US, looks to be impacting India and its currency worse than any other emerging markets. Infact, if not US then China should be much more worried about the scale back action, again only hinted!

Sensex: What is next from here?

The strong close of Tuesday and Wednesday became insignificant after the strong selloff seen on Friday. 1 day of bar has retraced past 4 days of rally. This indicates that the up move from 18550 to 19390 was only a minor pullback. The short term support is now at 18300 which is the level but this time ………….

 Banking sector is one of the worst performing sectors but even if the valuations appear cheap one has to wait for some stability before getting into value buying and this strategy has not yielded good returns so far in 2013!

A part of the above article is published in today’s morning Economic Times section of Navbharat Times by Ashish Kyal, CMT. Also in today’s morning daily research report “The Financial Waves Short term Update” we have mentioned important levels on Nifty along with the probable Elliott wave counts. For more information write to us at helpdesk@wavesstrategy.com or call on +91 22 28831358 / +91 9920422202 or visit www.wavesstrategy.com

Useful for: Trading using technicals, Why is everyone blaming FED, Rupee, FIIs  

Related to: FED, Rupee, INR, USDINR, FIIs, Sensex, Nifty, Navbharat Times

Elliott wave: What is Elliott wave theory and its Basic tenets

What is Elliott wave? Basic tenets of Elliott wave principle

In the 1930s, R.N. Elliott discovered that the stock market moves in recurring patterns that he called waves. He formulated the Wave Principle based on these wave patterns called Elliott waves.

Humans behave in a manner, when given a stimulus, in similar and probabilistically predictable fashion. This behavior of acting in similar ways makes us no different than the other creations of nature. Freely traded markets are the only sources that reflect the collective behavior of humans and the current social mood. Highly liquid markets cancel out the random events and what is left is the social mood of the mass and that indicates what we can expect in the future. We believe that any freely traded markets like Equities, Forex, Commodities move in the form of repeatable wave patterns that exhibit fractal nature at various degrees. This behavior was first observed by Ralph Nelson Elliott in1930s. This study of waves is now famously known as Elliott Wave.  

Ideal Elliott wave chart:

Rules of Elliott wave:

a. Wave 2 cannot retrace complete of wave 1
b. Wave 3 cannot be the shortest of waves 1 and 5
c. Wave 4 cannot enter into territory of wave 1

All of these rules have been followed.

Guidelines of Elliott wave:

a. Wave 3 is usually the longest and can be 1.618 / 2.618 times of wave 1 or larger if extended
b. Wave 4 will usually form a triangle
c. Wave 3 if extended, wave 1 and wave 5 will trend towards equality
d. Wave 5 and wave 3 will usually show negative divergence which indicates loss of momentum and break of 2-4 trendline will confirm impulse 5 waves up is over and 3 waves downside correction has started.

There is much more to this Elliott wave theory along with practical applications. Subscribe to any of our research products and get instant access to 1 hour of Elliott wave Educational video byAshish Kyal, CMT absolutely FREE! For more information visit www.wavesstrategy.com

Useful for: Learn Elliott wave theory, Elliott wave principle, Basic rules of Elliott wave

Related to: Elliott wave

Sensex and Nifty showing divergences at pivot lows – A rare event but what next?

Sensex and Nifty showing divergences at pivot lows – A rare event but what next?

By Waves Strategy Advisors, For more information visit www.wavesstrategy.com

Indian equity market has 2 major index - Sensex and Nifty. Sensex is comprised of 30 stocks and Nifty is comprised of 50 stocks.

Both of these indices move very much in sync and also show same Elliott wave structure most often. But this time a rare event took place. On 7^th August, Nifty broke the lows made on 21^st June whereas Sensex managed to protect that low on 21^st June. Infact, even on closing basis the low was well protected by Sensex which ensued the rally on upside. Now this can go to the books ofpositive divergence between major indices.

The below plot shows Sensex & Nifty daily line chart

It is rare to see divergences between Sensex and Nifty but a positive divergence alone cannot be traded unless combined with other techniques like Elliott wave, indicators like Price ROC, Channels. Currently the fall of more than 750 points on Sensex and 230 points on Nifty is also a rare event. We have seen 230 points on Sensex very often but a close down by more than 750 points was last seen only during the bear trend of 2008 – 2009. Today’s rare event has led to a few probable scenarios which have to be evaluated before taking any trading decisions.

We will be carrying out scenario analysis in Monday’s update of “The Financial Waves short term update”. Also, we have constantly asked our subscribers to look at current market as a trading market and not an investment market as the major indices both Sensex and Nifty are not reflecting the serious capitulation seen in Indian equities!!!

For subscribing to Equity Short term update and Monthly update visit http://wavesstrategy.com/index.php/store.html

Useful for: How to trade, Relative analysis, Research on Indian Equity market

Related to: Elliott wave, Sensex, Nifty, Intermarket analysis, Trading

Nifty interim update

Interim Update Bottom Line:

Nifty has failed to show any recovery signs throughout the day. The down move of around 180 points close was previously seen in 2011. The current move has opened a number of plausible scenarios from here on. It is better to wait for clarity before concluding if today’s is just a panic selloff and bounce back is possible or start of another leg on downside has started. Avoid creating any fresh positions and long positions can keep 5480 as stop. Also it is better to be in Options rather than Futures to avoid the event risk which we have seen before on Monday’s known as Black Monday. Also do not be too stringent with that level since many important supports have already broken! Also risk reward does not warrant fresh shorts here.

In short, wait for few more days of price action to devise a trading strategy!

For more information on daily report subscription visit
http://www.wavesstrategy.com/index.php/store.html

July inflation accelerates to 5.79% ahead of expectations, What’s next for Banking stocks?

By Waves Strategy Advisors. For more information on daily research reports and view on Nifty along with other stocks visit www.wavesstrategy.com

Elliott wave on ICICI BANK: Applying Time Cycle, Price ROC and Trendline

Banking sector has been underperforming the broader market since 2 months. After steep fall, many banking stocks bounced back from the support levels. ICICI Bank is the victim in this seriousselloff and moved lower in last four weeks and currently moving near the crucial support level.

At this inflexion point, combination of advanced and simple technical tools help us to identify the next move in the stock. Below we have shown ICICI Bank weekly chart that shows the Time cycle which works brilliantly over medium term. In addition to Time Cycle, Momentum indicator Price ROC and trendline shows why ICICI Bank arrived near the crucial levels and what can be the trend form here on.  

ICICI Bank Weekly chart:

Elliott wave counts are purposely removed from above chart

Wave Analysis:

As seen above in weekly chart of ICICI bank, in the mid of June 2013 prices have breached the upward sloping blue channel and simple moving average of 200 weeks decisively. Thereafter, prices moved lower consecutive for four weeks, and tested the strong support of 860. Extendedtrendline has been working very well in this stock.  At present, prices are moving near the sametrendline and pause the downtrend. Earlier, for two times prices have found support of thetrendline and bounced back on upside.

Time cycle of 22 weeks works very well in this stock. It helps to catch the top after every 44 weeks (marked by red symbol) and bottom 22 weeks (marked by blue symbol). This means after every top formation this stock formed bottom two times in 44 weeks and bounced back on upside. At present, prices have approached the Time Cycle for second time and managed to protect the support of 860. These increase odds for the reversal in the coming trading sessions.

Inflation datamight produce only short term spike in interest sensitive sectors. But it seems Banking stocks are now near crucial support area. A positive close shrugging off the negative news is positive sign for us. But it is also important to see what will be short term important levels for timing the trades!

To know the medium term wave counts of the same stock, access to the equity research report –The Financial waves STU published on daily basis before market open. For more information visit http://wavesstrategy.com/index.php/services/170.html

Useful for: How to trade using Elliott wave and Time cycles

Related to: Elliott wave, Time Cycles, Price ROC, Channels

Ashish Kyal on Zee Business Tips on Nifty 20130813 Waves Strategy Advisors

Ashish Kyal on Zee Business Tips on Nifty 20130813 Waves Strategy Advisors. For more information on various equity research reports and advisory visit www.wavesstrategy.com

SBI declared Q1 results below market expectations but what next??

By Waves Strategy Advisors, For more information please visit www.wavesstrategy.com

Aug 13(Reuter)-SBI Q1 net falls 14% on higher provisions against bad loans and increased NPA by 37%. The stock was down by more than 3% after the results were declared. 

The short term spike can be contributed to the event but please understand that trading based on outcome of result is not the correct strategy…

Results measure the past performance of the company whereas stock prices discounts what is expected in the future. This is exactly the reason why the event only leads to short term movement but gradually the bigger trend resumes.

Technically, prices gave break out of the Wedge pattern in the start of the June itself and moved lower sharply. This is the power of simple technical analysis which helped to take the position before news arrived.

SBI daily chart

Yesterday SBI was down by almost 3% and many fundamental analyst might now come out with sell rating on the stock when it has already fallen by more than 35% from the top of 2450 in June. So a sell at current levels is not a good strategy and technical indicators are showing extreme oversold state in this stock. Timing is one of the key to make money by trading in stock market.

As we can see on Daily Chart, once SBI has given “Wedge” Pattern breakout we have seen serious sell off.  We have captured this move very well and mentioned in our daily report “TheFinanacial Waves STU” about the breakout and it moved in lines with our expectations.     

Leading momentum indicator RSI is working very well in this stock. Prices have reversed 6 times from the 25 levels. Wedge pattern target was at 1571 and SBI’s recent low was 1575. CurrentlySBI is moving at crucial levels of 1600.

As per wave perspective, prices has completed wave E at 2430 levels and achieved the wedge target on downside. The stock is in matured stage of down move. To know what is next for State Bank of India (SBI) along with crucial levels get access to the daily research report “The Financial Waves” and also know the major trend for Nifty along with other stocks.

Do not wait for outcome of an event and trade objectively. For more information visit www.wavesstrategy.com write to us at helpdesk@wavesstrategy.com or call on +91 22 28831358 / +91 9920422202