Technical analysis: Daryl Guppy Moving average method along with Elliott wave

When Nifty is moving in a range and consolidating with no clear direction it is better to look at a few other techniques on a larger degree to be sure if we do not miss out the bigger picture.

We have been telling about the reversal in trend of Indian equity markets since start of March when index reversed from 9119 levels and have been very accurate to highlight it here so that the readers stay objective when it was most needed. Since then Nifty has already corrected by nearly 12% from the highs. However, it is prudent to test our outlook by applying a few proven methods of technical analysis that worked brilliantly in the past – Daryl Guppy when combined with Elliott wave analysis gives a very objective outlook.

The below research was applied in today’s morning research report “The Financial Waves short term update” along with medium term Neo wave counts. There cannot be more objective way of looking at charts. Completely different studies providing similar outcome increases the probability and conviction.

Daryl Guppy method of Moving averages applied on Nifty

Wave Analysis:

Daryl Guppy method of Moving averages is an excellent way to gauge if the medium term trend is changing or if it is still intact. This method uses a cluster of short term moving averages and cluster of long term moving averages.

Whenever all the short term moving averages move below each and every long term moving it indicates that the medium term trend has probably changed and whenever each and every short term moving average moves above all long term moving averages, longs can be initiated as it indicates reversal in trend.

Looking at the Nifty chart above requires little explanation and we can clearly see that how all short term moving averages moved below the long term moving averages recently. Blue averages are now retesting the red averages and turn back down from here will decisively change the outlook to negative.

Also please note that how long term moving averages cluster together after which major trend reversals happen.

In a nutshell, these are the objective techniques that are suggesting the reversal from positive to negative and helping us stay rational rather than getting carried away. Over short term ……… will act as immediate resistance and the support lies near ………. zone which is as per Bollinger bands concept highlighted in previous update.

To know the Neo wave counts of Nifty and how we are combining both of these techniques subscribe to“The Financial Waves short term update” which covers detailed analysis on Nifty and 3 different stocks. Subscribe annually and get the weekly medium term research report absolutely FREE which will cover Nifty Neo wave analysis along with MCX Gold medium term outlook. Contact US at helpdesk@wavesstrategy.com or call us at +91 22 28831358 / +91 9920422202 for more information…

Nifty: Neo Wave analysis – Volatility with more than 150 points movement is here to stay!!!

Neo wave is advanced concept of Elliott wave that helps us to reduce the number of probable scenarios and many times provide just one possible outcome that looks most probable.

Trading is also based on scenario analysis and one has to bet on probabilities rather than certainty.  We take a step forward and combine this advanced study of Neo wave with Time cycles to deduce the best possible outcome.

Indian equity markets have entered into one such very high conviction trade setup over short to medium term. Now look at the below chart of Nifty as per Neo wave analysis which is picked up from the weekly research report “Where to Invest NOW?” published every week along with outlook on Gold, Mutual Funds with applied Elliott wave under the flagship of Waves MF Advisors.

Below is the detailed analysis on Nifty using Neo wave from that report –

 

The above chart shows a Diametric pattern which is a 7 legged corrective pattern. This is a BOW – TIE Diametric looks to be complete at the high of 8845 and post that the primary wave on downside has started. If this is correct than we should head for much lower levels from here against the majority who are advising on buying on dips as the index has already corrected by around 8%. If this strategy has to hold true then imagine what would have happened to your investments in 2008 and 2011.

The above chart is definitely not sending across very good signs and it is time to stay cautious! Break of important levels can result into serious capitulation which will be a surprise to majority. Volatility will increase, Movement of more than 150 points will become a norm and everyone will start finding out logical reason or rather news why prices are falling. All this will be post the fall but for now STAY ALERT and forecast the future rather than relying on postmortem news!

Detailed justification for the above outlook is given in the weekly update “Where to Invest NOW?” and the short term research report “The Financial Waves short term update”

We do not use Neo wave in isolation but try to combine it along with Time cycles, Fibonacci ratios and many other basic but important technical tools to keep us objective on the most probable scenarios.

To know where Nifty is headed from here over medium to long term subscribe now to this weekly research report and get indepth analysis with most objective techniques applied.

For more details visit www.wavesstrategy.com or write to us at helpdesk@wavesstrategy.com or can call us on +91 9920422202/ +91 22 28831358

Sensex impact of Rupee, MAT, Chinese IPO, fresh triggers awaited!

The below is the English transcript of article by Ashish Kyal, CMT Director of Waves Strategy Advisors in Economic Times section of Navbharat Times

Indian equity market has been struggling over past few weeks. Intraday volatility has increased given the news flow and data such as WPI figures, Industrial growth and worry about domestic demand pick up. Sensex managed to close at 27324 with some gains on Friday but has so far not taken out the upside resistance of 27600 which is important for short term positive confirmation. On downside low at 26400 is very important support. We can expect a range bound movement in current week and only a break above 27600 will resume the uptrend.

Midcap and Smallcap sectors: Selling seen over past few weeks was more prominent in Midcap and Smallcap sectors which have reached over valuation area. Pharma sector has also corrected sharply from the highs as a few of the stocks were demanding very high PE ratio which was not justified. Banking sector on the other hand has been consolidating within a range and fresh clues are awaited for future trend to emerge.

RBI steps will be crucial: WPI inflation data released last week has dropped to record low levels of -2.65%. This has raised expectations that RBI can start focusing on growth and cut the key policy rate in its upcoming monetary meeting to be held on June 2. RBI has cut interest rate twice this year and after the negative WPI figure and poor industrial growth, pressure will be build on them to take further positive steps which will be important for direction of interest sensitive stocks.

Indian Rupee: Indian Rupee had been under pressure over past few weeks and has touched the level above 64 against USD few days back. Further move above 64.50 will be a concern for RBI as Mr. Rajan has managed to reduce the volatility in Indian Rupee after taking over as governor. Move above 64.50 can trigger more USD demand thereby putting pressure on the economy.

Minimum Alternate tax (MAT): Uncertainty over MAT for years prior to April 2015 has made foreign investors nervous and has reduced confidence in existing government. Decision on MAT is going to be important to restore back confidence into Indian government and their reform policies.

China IPOs impact: Chinese equity market has been in news after as many as 20 companies have been planning to issue IPOs. It is believed that this will impact other emerging equity markets including India as Foreign institutions will probably move out of other equity markets and will start putting money in Chinese IPO that has given promising returns over past year.

Week ahead: Sensex has been moving sharply over past few days but within a range. This week the support is at 26400 and upside resistance at 27600. We can expect consolidation between this unless more clarity is obtained from the above fundamental data. From technical perspective prices have moved below 20 weeks Moving average which represents medium term direction. Investors should therefore remain cautious and wait for clear breakout!

For more details visit www.wavesstrategy.com or write to us at helpdesk@wavesstrategy.com or can call us on +91 9920422202/ +91 22 28831358

Nifty sharp reversals: Is it predictable using Technical analysis? Reading RSI indicator during corrections

Bottom Line: Nifty continued to move in an environment which is not conducive for positional trading. Wait for range to break for clear trending move to emerge!

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that “In short, trading this upside correction can be challenging as the pattern of this up move is not clear so far and there is no higher high and higher low formation. Using the bar technique the trend is positive but give leeway as this up move can be interrupted by sharp reversals!”

Nifty continued to move in a high volatile environment with no clear trending direction. We have been accurate in pointing out that the up move will be interrupted by sharp reversals which happened yesterday. After a strong move from 7997 to 8332 levels, Nifty gave away nearly 200 points of gain in just single day. Infact, this move happened on the very next day after a strong rally of 140 points just a day before. Such sharp reversals on either side makes the trading environment challenging. But this has to be expected after a good trending move especially when we think that medium term downtrend has started.

For a clear direction to emerge we have to see a decisive break either above 8335 or below 8000 levels. This is a big range but prices can oscillate within this. Today we can expect minor Gap up opening after a strong down move of yesterday to make it more difficult.

As highlighted earlier it is better to stay with the downtrend as the 108 days cycle has entered into the maximum acceleration zone. We are not going to buy in any rally unless and until the time cycle low is formed by third week of June.

As shown on hourly chart, currently wave x is ongoing which is internally subdividing into waves a-b-c. This can result into one minor push on upside back towards the trendline resistance at 8270 post which downtrend will resume. This minor push is not necessary.

In short, after a sharp up down move there is possibility that we can see some consolidation and range bound action before a trending move can emerge. Today we can expect a Gap up move after strong selloff seen yesterday. This probable path is as shown and any pull back on upside might not last for more than 2 days. Trade cautiously unless a clear trend emerges from here on.

Now post your charts and start the discussion on Technical Analysis, Elliott Wave and other Technical tools. To Post your query visit http://www.wavesstrategy.com/Discussion/Discussions.aspx

Nifty- Are we headed for a crash? Any pullback should be temporary!

Nifty video update on Elliott wave / Neo wave structure of Indian markets. Are we indeed headed for a crash and the risk has been increasing with each passing day..... For subscription to daily research reports visit www.wavesstrategy.com Pricing page...Indian markets are at a very important juncture!

Nifty: Is Indian Equity markets headed for a CRASH!

Many might be still wondering and trying to figure out the logical reason for strong selloff in Indian equity markets over past few weeks. The intensity of the down move has been increasing and Nifty is down by more than 2% without any significant news or event. This is simply showing that every pullback is now temporary and the major trend has reversed from positive to negative. During such scenario when the movement is against the majority the only objective technique that remains tested for time is Advanced Elliott wave – Neo Wave along with Time cycles.

It is these studies that helped us to stay on the short side of the trend and constantly warn our subscribers about the impending turn in the overall trend. Now the big question is – Are we headed towards much lower levels from here or the down move is just temporary?

Let us look at a few concepts of Time cycles and Elliott wave to understand:

Nifty daily chart:

The above chart shows two important time cycles as per Hurst’s analysis – 54 days and 108 days cycle. The cycle reaches its maximum downside acceleration at the zone of 75% completion. 108 days cycle is now already at 73% completion so we are headed for the crash zone as per this cycle. Another cycle of 54 days is now heading towards 50% which is the topping area. So after next few days this cycle will also turn on downside. So as per cycle theory there is still lot of room on downside and today’s sharp down leg can just be its first leg of accelerated momentum.

As per Neo Wave – Advanced Elliott wave: we have completed a very important uptrend that started from the lows of 5118 in August 2013. This is for the first time that prices have also formed lower highs and lower lows which is classical confirmation as per DOW Theory as well.  We will not be able to reveal our downside targets from here as it is meant for paid subscribers but the hint is we use Fibonacci levels from the truncated areas to get exact target zone!

It is now always that the technical picture gets aligned all together very accurately. Such alignment happened weeks back and probably this is the time again where everything is hinting towards the same thing – A probable CRASH! However, do not get carried away and use prudent stoploss levels in case market decides to play out otherwise. Our short term research report along with long term monthly forecasts gives a complete view on Indian equity markets and stocks with utmost objective techniques.

Subscribe now to “The Financial Waves short term update” and get “The Financial waves monthly update” free for annual subscription. We do not want our readers to miss out on long term structure which is very important as the overall trend is changing. For subscription options visit the Pricing page.