Nifty continues to move in narrow range near the important channel resistance.
Prices showed trend from 6200 to 6562 in span of 5 days and since then it is in non-trending mode from last 7 days. In today’s trading session even till 1.30 p.m, it was intact in between the important levels. Even heavyweight stocks such as Reliance, ICICI Bank, DLF, Maruti, PSU Banks, etc. have arrived near the crucial zone. On the other side RBI will be revising its interest rate policy on 1st April 2014 but we have seen over recent pasts, interest rate hike resulted in markets going up the same day. So markets might not always behave in logical way we perceive. Elliott wave patterns on other hand helps us to understand the structure and trend we can expect irrespective or event outcome!
During this kind of environment, it is necessary to combine other indicators with Elliott wave theory and basic technical analysis to get the clues for the next short term trend ahead. This time, we have used Average Directional Index to gauge the strength in the current up move.
Below is the part of research taken from The Financial Waves Short term update where use of Average Directional Index (ADX) is explained.
Nifty daily chart:
Wave Analysis:
What is ADX?
On daily chart, we are showing Average Directional indicator that measures the strength of the trend. It seems the +Direction index (blue) and negative Directional Index (red) both have reached extreme levels and are turning. +DI and –DI measures the strength of positive or negative true range. In simple terms it helps to understand if on an average basis market is closing more up than down. It also indicates extreme or overbought zone. As both blue and red line has reversed from extreme level it is an indication of sideways action or the uptrend is in matured stage. This is a lagging indicator and so we do not use it very often unless crucial reading is seen like currently. Previously such extreme reading was seen in October 2012 when both blue and red lines reversed and index corrected around 250 points.
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.
We have been applying various indicators and techniques in conjunction with Advanced Elliott wave theory to be with market direction. Do not miss the next wave as elections are not far away and high volatility is expected in the coming days. Subscribe to The Financial Waves Short term update which includes Nifty and 3 stocks where short term trading opportunity exists. For subscription options visit Pricing Page
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