Nifty showed
strong reversal exactly from the channel resistance we have been showing for
many months! Short term moving averages are decisively broken!
Nifty daily
chart:
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Nifty 60 mins chart:
Wave Analysis:
Nifty formed a strong reversal bar in previous week and broke the
important support levels of 8430 and even 8290. It seems the strong uptrend has
terminated after forming an Ending diagonal pattern at the top of 8627 which
was with an exhaustion gap. The same day itself we mentioned about a “key
reversal day” possibility and Nifty has continued to move sharply lower after
that.
In the recent monthly update itself we have shown medium term time cycles
and highlighted how the current uptrend has been a “risky affair” for
fresh longs to be entered along with key focus on commodity and commodity
related stocks that can be worse hit during the down fall. In past few days of
selloff Metals have continued to be one of the strong underperformers.
On a weekly basis, prices have made Evening star pattern which is
a classic reversal pattern as per candlestick technique. One single weekly bar
has retraced prior 5 weekly bars completely. This is also one of the strongest
negative weekly bar from prior week’s high since the rally started from 5118 in
August 2013. The reason for emphasizing on the weekly bar intensity is to
highlight the magnitude of reversal even when interest sensitive sectors like
Banking has managed to show resilience!
From sectors perspective, apart from Pharma, all the sectors closed in
red territory. Bank nifty is moving in sideways action post the selloff from
18880 to 18180. Now, move below 18180 will make lower high lower lows formation
and suggest that top has been made in Bank Nifty. On upside 18600 will act as
an important resistance where 61.8% retracement of the prior fall is placed. In
the evening of Friday IIP data for the month of October and CPI data for the
month of November has been released. IIP for the month of October has slipped
to 3 years low of -4.2 % against expectation of 2.1%. Whereas CPI has cooled to
4.3 % against the expectation of 4.4%.
Now, looking at the price structure of Nifty there is high likelihood
that market will react negatively and current downtrend will continue further.
As shown in daily chart, we continue to think that important top has been
made at the level of 8627 levels as post that prices have been showing impulsive
down move. As per wave perspective, there is high probability that intermediate
wave z of Complex correction pattern which started in the month of August 2014
is complete at 8627 levels and next leg on downside from medium term
perspective has started. Prices continue to follow bar technique very well and
not taking out the high of prior bar. As long as this structure remains intact
trend will remain bearish.
It is prudent to avoid catching a low in the current fall and we have
seen the waves extended during the fall of Crude.Existing short positions
should follow trailing stop method and avoid catching a low in this impulsive
down move. Use 8350 as crucial risk management level.
In short, the trend will remain negative as long as 8350 is protected on
upside. Move below 61.8% of the prior up move which is near 8080 is going to be
crucial to further confirm start of a higher degree downtrend!
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