Nifty probably start of next leg on upside!!!

The following research was published today morning before equity markets opened in "The Financial Waves Short term update" by Waves Strategy Advisors. This report has daily 3 stocks along with Nifty outlook using Elliott waves. For subscription please visit http://wavesstrategy.com/index.php/store.html. 

Bottom Line: Nifty had a range bound movement after strong gain of Thursday. A weekly close above 5950 important for positivity!

Nifty daily chart:

Nifty 60 mins chart:

Nifty bearish possibility:

Wave Analysis:

In previous update we mentioned that, “In a nutshell, a failed H&S pattern suggests that the short term trend is now positive with medium term trend also remains positive. Positional long traders should now use 5800 as crucial level on downside and we can see upside levels of 6040. The monthly forecast published yesterday also shows Price to Book ratio and Price to Earnings ratio of Sensex and why we think Indian markets are not expensive. In fact, PB ratio currently stands near 2003 levels!!!”

Nifty closed the previous week near higher end of the candle. On weekly basis we have yet to see a close above previous candle’s high. The high in previous week was at 5950 and a weekly close above 5950 will induce further positivity.

Revisiting volumes – Over past 2 days we can see how volume has increased with the uptrend and approached near the average line whereas during correction the volume continued to be subdued. I am not too strong follower of volumes but at times when there is a perfect rhythmic movement in this parameter along with price it is not worth ignoring. The day we will see volume reducing with up move it will be first sign of weakness but as long as volumes are increasing with uptick in prices the trend will be positive.

During this downtrend from 6140 to 5700, we have seen Smallcap and Midcap sectors outperforming. Even when Sensex and Nifty broke previous pivot lows the broader market continued to sustain.

We are showing an important blue channel on daily chart that is connecting the lows at 5118 an 5700. This looks to be a very important channel and as long as this remains intact our view will be positive. Move below 5800 will not only break this channel but will also fill the Gap area created on Thursday. So existing long positions, should keep this as a strict stoploss as move below it can open up downside targets for 5640. At the same time trend keeps changing every 2 to 4 days and so position sizing should be done accordingly.

As shown on 60 mins chart, the last segment of minor wave (a) is retraced in faster time thereby confirming that short term trend is now positive. A move below 5800 in faster time will be first sign of weakness. As long as this does not happen we can expect a move atleast towards 6040 or probably higher. We are also showing a short term blue channel which has immediate support near 5860.

In short, looking at volumes, channels, faster retracement of last falling segment our view continues to be positive with important support at 5800 on downside. However the current uptrend is now 2 days old and we will see if it can continue beyond 2 more days or not since trend has been changing every 2 to 4 days. A move above 5950 will resume the uptrend and on upside we expect to see 6040 levels.

Note:

“The Financial Waves Monthly Update” is now published. It has touched upon following: Sensex in Gold - real money gives correct picture of why majority of stocks are at new lows! Bank Nifty relative chart along with Nifty which shows that why Banking sector as a whole should underperform for months to come. Sensex PE ratio and PB ratio why Indian markets are not expensive, USDINR path, US markets and Government shutdown impact, L&T long term forecast with probable bottoming levels, Silver secular bear trend in force!

Subscribe monthly research report “The Financial Waves Monthly update” and get access from medium to long term analysis on Sensex, Bank Nifty, US markets – DJIA, USDINR, Silver, Larsen & Toubro, Fundamental ratios – PB ratio, PE ratio, GDP growth chart. To subscribe visit http://wavesstrategy.com/index.php/store.html