The below excerpt is picked up from "The Financial Waves short term update" by Waves Strategy Advisors. For subscription to daily research report visit www.wavesstrategy.com
Date: 24th March 2014 morning report
Nifty formed
an inside bar smaller than the previous bar. Reliance and Nifty both at crucial
levels! Nifty levels to watch are at 6580 and 6430. The below research gives a
brief overview on correlation between Reliance Industries and Nifty.
Nifty,
Reliance and Ratio daily chart:
Wave Analysis:
In previous
update we mentioned that “In short, there is no change in our outlook
as of now which is sideways to topping. Even the stocks are not providing a
clear direction. Break of crucial levels shown on chart will determine the
trend over short term and intensity of the movement will indicate medium term
outlook”
Nifty continues to move in 35 to 40 points
range. On Friday, the movement was confined between 6520 and low near 6485
thereby forming an inside bar. It has been 9 days and prices have swayed
between 6575 and 6430 which is a movement of 135 points in totality. Saturday
was a short trading session and hardly produced any movement.After the sharp up
move of 3 to 4 days markets are ensuring to form a challenging trading
environment. During sideways action the best technique that works is Bollinger
bands and we have used it prudently. The short term wave counts have 2 to 3
different possibilities even now and channeling technique is suggesting there
is not much room left on upside. Nevertheless looking at sideways action after
sharp rise there is still a possibility that one minor leg towards 6580 – 6630
might be pending. On contrary, violent break of 6425 will indicate atleast
retracement of the up move from 5980 to 6575 has started. A slow and sideways
drift below 6425 will not carry much importance. So it will be important to see
the intensity of move when 6580 or 6425 is broken.
Nifty and Reliance Industries correlation:
On the 1st chart we are showing
similarity of pattern between Reliance Industries and Nifty. Both the stock and
index looks to be forming a triangle pattern. This corrective pattern is
ongoing since 2008 onwards. The reason of comparing the index with Reliance Industries
is that we think this can be one of the stock which will be leading the index
in next Bull Trend. So a breakout on RIL will indicate a breakout on index as a
very high possibility. However, even this time RIL came close to the strong
resistance zone near 910 – 930 and reversed back on downside. It has been more
than a year since this stock is moving within the range of 770 – 930.
Reliance is forming a symmetrical triangle
whereas Nifty is forming more of an ascending running triangle pattern. To get confirmation
of triangle breakout we should see a sharp and violent rise after the breakout
and if the momentum continues to be slow and dragging even if the trendline is
broken we will look at it only as the part of the pattern formation.
Even though Reliance has been a major laggard
post 2008 but the correlation has been very high with index with each major
turning points happening within few months horizon. The ratio of Reliance /
Nifty (red line) shows that the gradual reduction in slope of the fall indicating
that thee underperformance has been constantly reducing. A break above 0.16
level will be first strong positive sign that Reliance has started the period
of strong outperformance for months to come.
In short, expect a breakout to occur in this
week as the sideways correction is already 9 days old. Also a close watch on
Reliance Industries is imperative in case this stock leads the direction of
movement for major market. Till that happens patience will be warranted!
The below excerpt is picked up from "The Financial Waves short term update" by Waves Strategy Advisors. For subscription to daily research report visit www.wavesstrategy.com
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