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
.png)
No comments:
Post a Comment