Nifty: Is this distribution pattern post Elections or time for fresh investments?

Elections have been a major event over past many weeks or rather months. The major rally in Indian markets started from 5118 level in September 2013. 

The high was made at 7564 levels on 16^th May 2014 on the Election results announcement.  Since then prices have failed to take out either the high or the lows of that day and moving in a range bound movement. Spikes have very high importance for us as they decide the major support and resistance levels.

Is it time to look for fresh investments?

Many investors were waiting for elections to get over to enter into the markets in expectations that the volatility will come down post the event. However, one should understand that stock markets are constantly discounting the future and are forward looking. The news outcome or results announcement by corporate are for the past but markets are discounting the future. So there is time displacement. Have you ever wondered when better than expected quarterly results are announced why does prices of the stock still falls or corrects on downside? The exact reason is explained above.

It is therefore necessary to use objective techniques to see the future path of stock market. Below is the excerpt from “The Financial Waves short term update” published on 26^th May morning

Nifty 10 mins chart: Published on 26^th May before market opened    

Happened: On 26^th May by 2:30 PM touching the high at 7500

On 26^th May morning research report we mentioned the following:

Nifty very short term chart is shown above which is reflecting the internal wave structure. The move on upside on 16^th May was wave a and post that prices corrected the sharp up move in form of wave b which formed a triangle. Yesterday we started the uptrend again in form of wave c and currently prices are in wave iii of this wave c. The momentum should slowly subside now which is a typical characteristic of c waves in a Flat correction…..a normal impulse will result in a move towards 7460where wave iii will be equal to 1.618 * wave i.

Happened: Nifty made a high above 7460 touched 7500 levels and reversed sharply lower. The intraday movement was of nearly 235 points. However, such spiky movement provided more important clues to the overall trend of the market.

Today morning we published the following:

Importance of Spikes:The sharp movements make very crucial support and resistance levels. As mentioned earlier the high made at 7564 on 16^th May which is the election result day is still not taken out and also the low made at 7130 made on same day is intact. Yesterday’s spike was within this range and gave other levels of 7504 and 7270 which will be important. Please understand this range is well within the prior spike so for strong reversal break of …………followed by ………..will be crucial.

In short, Nifty has met our minimum requirement on upside… Any move back above 7430 will result sideways action to continue for few more days between 7564 and 7130 levels that looks like distribution rather than accumulation at higher levels!

So see yourself if Markets are forming a distribution pattern is it right time to invest? The patterns are clear, indicators are suggesting momentum is slowing down but volumes are still heavy – a classical sign of distribution. So which are the crucial levels that will confirm the reversal of trend?

Know for yourself by subscribing to the daily research report “The Financial Waves short term update”a very different perspective to markets using Advanced technical analysis on Nifty and 3 different stocks. Subscribe by visiting http://www.wavesstrategy.com/index.php/store.htmland get your copy of daily report directly to your email id. The report is written by Ashish Kyal, CMT and he shares his insights and years of experience on Elliott wave through it!