HINDALCO: Trading using Ratio Analysis!

The below research is by Waves Strategy Advisors. For daily research report subscription visit http://www.wavesstrategy.com/index.php/store.html

Indian markets continue to move with rotational rally concept.

In this kind of market, it is better to understand which sectors or stocks will underperform or outperform Nifty. Hindalco is one of the stocks from metal space which is underperforming the Nifty. In the mid December 2013, share prices were trading at 126 levels and currently moving at 98, almost 20% down from the highs of December 2013.

Below is the part of research taken from“The Financial Waves STU” which was published in the morning of 25^th February, 2014. We have shown Hindalco/ Nifty Ratio analysis which clearly suggest that, from the start of 2011, hindalco is underperforming Nifty. In the month from September to December 2013, this ratio tested the resistance of 0.20 twice but it failed to move above the same and moved lower, which suggested that weakness to prevail over short to medium term.

Hindalco/Nifty Ratio chart:

Wave Analysis:

As discussed in the previous update of 31st January 2014, “In short, as long as 108 is intact on upside and prices persist within the falling red channel our bias remains negative in this stock and prices can move lower towards the next support of 100 / 99”. BANG ON!!

Hindalco moved precisely as expected. Prices sustained below the strong resistance of 108, sustained within the downward sloping red channel and achieved both the targets of 100/99. After achieving the target, prices moved lower below 61.8% retracement level and closed on lower note since 3 trading sessions.

Above we have shown Hindalco/Nifty ratio daily chart since 2011. In 2011, ratio has formed top near 0.044, thereafter prices have been moving lower by forming lower highs and lower lows. This indicates the underperformance of Hindalco against major index Nifty. Time Cycle of 243 days works very well on this ratio chart. This is the Topping Time Cycle and it has provided the top for 2 times since 2011. Recently, ratio has approached the same cycle and reversed from the resistance of 0.020. In short, as long as 0.020 is intact on upside underperformance of Hindalco will continue against Nifty and it can move lower towards 0.011/0.10. 

As seen above in 120 mins chart, prices are moving lower in the downward sloping red channel brilliantly. As per wave perspective, intermediate wave …………..

Along with the ratio analysis, we have shown daily and 120 mins chart with Elliott wave count which helps to do better forecasting for future. In this challenging trading environment, it is better to use objective techniques. Just Subscribe to “The Financial Waves STU”which includes intense research on Nifty with 3 stocks where short term trading opportunity exits. By subscribing to this report, one can make his own trading strategy for better trading. For more information, visit to pricing page.