Monday, November 17, 2014

Nifty continue to trade in sideways action but near important channel and Bollinger Bands ®

Bottom Line: Prices continue to trade near the cluster of channel trendlines and important Time cycles. We are entering in third week of November!

The below research was published today morning in "The Financial Waves short term update" by Waves Strategy Advisors. For subscription options visit

Nifty daily chart:


“The Financial Waves Monthly Update” is now published. The current research focuses on Understanding the Global phenomenon: The month of October witnessed huge volatility across the Global markets. It becomes important to look at the Global charts from across the continents to understand how each of these equity markets has fared. Bank Nifty outlook, CRB Index forecast, Sintex Industries Long Term Forecast and Outlook on USDJPY and JPYINR

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Nifty 60 mins chart:                                                    
Elliott Wave Analysis:
In previous update we mentioned that In short, one should trade as per the Bollinger Bands unless a clear trending move emerges. The support as per this band is near 8310 and resistance is near 8415 levels. Decisive close above or below these levels will be required for meaningful trend.”

It has been 8 trading days in sideways action for Nifty even during the result season. Prices have been constantly failing to cross above the 8420 level and at the same time protected the important short term support near 8290.

Applying Basic technical analysis: Channels are the most basic and important concept of technical analysis and we have seen in past how well it tends to work most of the times. On daily chart, we are showing a very clearly visible black channel that is connecting the lows of 5118 made in August 2013 and 5920 made in February 2014. Both of these lows are very crucial that were made just prior to the start of strong uptrend. Projecting a parallel line and connecting the recent highs with high of July 2013 we get the important resistance zone. Since the trendline is upward sloping the resistance is drifting higher with each passing day and is now placed near 8490 levels.

Breakout above this channel with a very strong momentum will be an indication of increase in slope of the trend. However, this is usually the property of an impulse wave. Over here we are dealing with corrective legs on upside as there are no clear internal impulse counts. This when combined with momentum indicator is suggesting loss of strength rather than increase on upside. Further combination of Time cycles – a complete independent study is also suggesting that the medium term trend is in matured stage. Nevertheless, price confirmation is most important and unless we see a strong selloff below 8290 followed by 8200 the above points will only remain as a warning signal.

On Weekly basis, the high and low of previous week is at 8415 and 8305. So a close below 8305 by end of the week will be first sign of weakness. Unless that happens, the weekly trend will remain positive and move above 8415 will resume it higher.

Time cycles: Many of the Time cycles are entering into the negative mode in third week of November which should eventually put pressure on prices. So this week is going to be very crucial and if prices indeed shrug off all the warning signals from supporting indicator we will be forced to adopt alternative scenario.

In a nutshell, the short term trend so far is positive as there is no negative price confirmation. However, one should be aware that the secondary indicators are sending warning signals. If there is strong pick up in momentum and Nifty decisively closes above upper trendline resistance currently near 8490 the current rally will extend further. On the other side, negative weekly close below previous week’s low near 8305-8290 will be first negative price confirmation. Stay alert rather than complacent and wait for prices confirm the direction of breakout! Avoid catching a top unless crucial support level breaks on closing basis!!!

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