Nifty short to long term forecasts using Elliott wave, Channels, Indicators and much more...

Bottom Line: At times it is important to look at the bigger picture to understand the overall direction.

The below research is picked up from "The Financial Waves short term update" by Waves Strategy Advisors published on morning of 28th September 2015 even before RBI monetary policy.

Nifty weekly chart:

Nifty weekly chart:

Nifty daily chart:

Nifty 60 mins chart:            

Wave analysis:

In the last update we mentioned that, “Today being expiry volatility cannot be ruled out and one has to keep an eye on 7910 followed by 8000 on upside and 7720 level on downside. Decisive break below 7720 will resume down move towards 7600 whereas any move above 7910 followed by 8000 will indicate deeper upside pullback.”

Nifty continued to move in a range with no clear trend. Prices opened in red made a low near 7800 but later managed to close positive near 7870. There was only one day of down move 22^nd September and post that we are seeing positive attempts. This is keeping the overall trend sideways for now.

At times it is important to look at the bigger degree charts to understand the overall trend. The fist weekly chart of Nifty shows the contracting running triangle formation. Yes, we are not looking at the overall up move of 2013-2014 as impulsive that many of the Elliotticians might be assuming. Many of the stocks that rose in 2014 have corrected back to the levels or lower from where the rally started. Also there is no strong internal clear subdivisions in 5 waves which is a necessity rule for any impulse pattern. Wave characteristics are in more sync with the triangular activity as shown on the first chart. As per these wave counts prices are now in primary wave [E] and so medium term trend is down for next few months. It is only on completion of this primary wave that the next big BULL TREND will start. We will highlight it here as and when we get the confirmations of the start of next bigger degree uptrend post wave [E] is over.

Now looking at the second weekly chart we can see, in the month of August 2015, sharp fall from 8530 to 7540 level which is nearly 1000 points in this primary wave [E]. Prices are moving in corrective red channel and have bounces back from the lower end of the channel. The Flat correction a-b-c is complete and we are currently in wave x which is retracing this pattern on upside. The channel resistance is now near 8330 on upside. As the line of least resistance is on downside more leverage shall be done during downtrend whereas position sizing and crucial stoploss levels should be maintained for long positions. In a nutshell, we are currently in wave x that looks to be forming a complex pattern and so short term trading might be little difficult. Nevertheless, let us look at the short term charts to understand the key levels for initiating trades.

Looking at the hourly chart, a sharp down move is followed by upside retracement and during such scenarios Bollinger Bands® will provide important support and resistance. As per this support is now at 7720 and resistance is at 7990. A close above or below these levels will result into short term trending move. Looking at the overall structure and failure of prices to generate downside momentum for more than 2 days we think there can be an upside breakout.

Pattern recognition: The daily chart shows a very similar pattern that is currently in formation in the past as well. Similar pattern looking like inverse Head & Shoulder was seen during the low of 5118 in August 2013, later during January 2015, June 2015 and now in current zone. All of these patterns in the past gave positive breakout for a move of around 400 points or more on upside. Projecting an upside move from current levels give us the upside level at 8300 which is exactly at the channel resistance.

In a nutshell, the current trend for Nifty is sideways with crucial support at 7720 and resistance at 7990. A decisive close above this level will result into a sharp move towards 8300 levels on upside. Failure of prices to correct by more than 1 day has been suggesting that one upside pullback is possible before the medium term downtrend can resume. Also RBI might cut interest rates by 25 bps given the weakness in equity markets as mentioned earlier. They might surprise by tweaking other policy rates as well. However, Mr. Rajan is much more unpredictable that markets and one should not try hard to forecast what stand he will take! 

For subscription to the daily research report with detailed view on Nifty and 3 stocks along with applied Elliott wave analysis, Indicators, Channels visit http://www.wavesstrategy.com/Pricing.aspx . Trade using objective and scientific methods rather than based on news or events! 

Announcing Elliott Wave and Time Cycles Online Live Training by Ashish Kyal, CMT

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Will RBI cut interest rates? Equity markets leading government actions - US FED did not change rates!

US FED meeting was one of the major events that majority have been tracking.

The reason was obvious that an increase in interest rates by FED would have resulted into negative repercussions across global equity markets. However, we beg to differ on this and believe that the government or central bank actions are lagging indicators to equity markets. After the event on 17^th September 2015, US major index – DJIA entered into red territory on the same very day even when FED did not hike interest rates!

Now below is the excerpt from our daily research report “The Financial Waves short term update”published on 16^th September morning.

Nifty had a subdued opening and prices traded in red throughout the day. There was no momentum even on the downside and majority of the stocks are also stuck in a range. It seems most of the Global markets and not only India are waiting for some trigger probably US Fed meeting which is due this week. We are not waiting to see what FED announces but the reaction of global equity markets to the FED decision is going to be important. Looking at the sharp selloff in last week of August even in DJIA – US there is high likelihood that the status quo will be maintained and there is not going to be any rate hike. An uptick on this news will be in sync whereas a sharp selloff will result into news that the economy is still not out of the woods and so FED did not hike the rates. Case in point: News will change based on the market reaction post the event! For us a negative close on a positive outcome will be bearish and vice-versa.

Will RBI cut interest rates in its policy meeting on 29^th September 2015?

Looking at the performance of Indian equity markets over past few weeks and given the sharp selloff on 24^thAugust until first week of September, we think there is very high likelihood for RBI to cut repo rates by atleast 25 bps! We will not be surprised to see if RBI tweaks other key rates as well to increase the supply of money in economy. As mentioned earlier Equity markets are leading government actions and central bank actions are lagging indicators.

Nifty daily chart:

The above chart shows that the cut in interest rates by RBI in Feb 2015 created a medium term top on same day at 9119 levels. Later the rate cut was done in June and markets continued to move lower even after that. So irrespective of the RBI cut in interest rates equity markets continued to drift lower.

We strongly think that the underperformance in equity markets will put pressure on RBI to cut interest rates in upcoming meeting on 29^th September but we have our doubts if Nifty will move higher after the cut. Recent past shows markets reacting lower on rate cuts. Let us see if history repeats again this time!

We do not rely only on one aspect of history to base our decisions but there are lot of other indicators – Elliott wave pattern, Indicators, Moving averages which are slowly getting aligned again! We will highlight in our daily research report when is the time to pull the trigger…

Do not miss out the another opportunity which is going to arise soon like the one we saw in last week of August – a strong trend. Subscribe now to “The Financial Waves short term update” from Pricing Page. For any other details visit www.wavesstrategy.com

Video: Nifty trading strategy and Midcap picks CNBC TV18

Video: Nifty trading strategy and Midcap picks CNBC TV18. For subscription to daily research report with charts, Elliott wave counts and Technical analysis visit www.wavesstrategy.com

Nifty: Reversal from Channel, Positive Divergence and Neowave - 2 stage confirmation technique!

Nifty reversed back sharply and had a Gap up opening in today’s trading session. Nifty is up by more than 100 points and such sharp upside reversal might be surprise to many. But we have been constantly warning that the down move looks to be in matured stage and the participation was reducing. Infact the leaders during the fall were not contributing. All in all the downtrend of past week was not supported either by momentum and we clearly mentioned our apprehension as the reversal can be sharp and fast.

Today’s price action vindicated our stand and shows why the “Risk Reward” a very important technical parameter was not favorable for fresh shorts when pessimism was maximum!

Now have a look at the below daily chart of Nifty which clearly shows the most basic but very important concept of Channels:We have shown this channel in our daily research report “The Financial Waves short term update”published in morning before equity markets opened.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis: Following research is picked up from the “The Financial Waves short term update”

On 8^th September morning research when Nifty closed previous day at 7558 we mentioned the following - “Prices are currently in wave (v) which is forming an overlapping Ending diagonal pattern. Due to the overlapping nature we are seeing positive divergence not only on the hourly chart but also on the daily time frame. Also these divergences are visible across the sectors and stocks. Minute wave iv of this minor wave (v) is formed at yesterday’s high of 7705. For this count to remain valid minute wave v should remain smaller than wave iii. So the maximumallowable limit as per this scenario is towards 7500. Looking at series of positive divergence across the scale and channel support there is high possibility that 7500 will not be breached. Keep an eye on 7705 which is wave iv area and also prior bar high. Decisive close above this level is necessary for any short term positivity.”

Nifty indeed protected the level of 7500 on downside which was the maximum allowable limit as per wave v target and moved sharply higher.

Neowave 2 stages confirmation: Nifty had minor Gap up opening near 7590 level but in the first hour itself prices took out the low of prior bar and made a low at 7539 levels. Post that due to lack of momentum on downside which we have been observing over past few days prices reversed back sharply and touched intraday high of 7720 levels. This movement also took out the high of 7705 of previous bar on intraday basis.

As per Neo Wave logics faster retracement above the ii –iv trendline followed by complete retracement of wave v virtually confirms that the ongoing pattern is complete and the low is in place. By breaking above 7705 Nifty provided 2 stage confirmation on Tuesday morning itself.

In a nutshell, all of the above techniques helped us to be against the crowd again at important low and before we have been able to capture the down move from 8400 as well when majority were extremely optimistic.

Subscribe NOW to “The Financial Waves short term update” and get insights into these objective ways of trading Nifty and stocks rather than getting carried away in extreme pessimism exactly when Nifty was at important channel support with strong positive divergence across the time frame and provided two stage confirmations as per Advanced Elliott wave techniques! For subscription option visit Pricing Page or Contact US.

Nifty: Leaders are not falling. Newly coined "h" pattern! Will it work AGAIN?

Bottom Line: Nifty looks to be forming an “h” shaped pattern – a sharp fall after a sharp rise probably forming a double bottom! We have coined a pattern that looks like "h" shape...

Nifty daily chart:

 

Nifty 60 mins chart:

            

Wave analysis:

In previous update we mentioned that, “expect a range bound activity to continue between 7870 and 8080 levels over short term. Break below 7870 can increase the downside pressure but the fall might get limited and protect 7667 which is previous spike low.”

Nifty had a Gap down opening of around 65 points and the index continued to trade negative throughout the day with selling pressure intensifying post 1 pm. During this downtrend many of the stocks have managed to protect the previous pivot low. One should keep a watch on market leaders that have contributed maximum to the trend. So if we look at stocks like Tatasteel, Tatamotors, Yes Bank, ADAG Group, Reliance Industries etc are still well above the lows made in previous week. So the leaders in the downtrend are now showing resilience which is suggesting that the intensity of down move on Nifty should now reduce.

As shown on daily chart, prices are moving in downward sloping channel and prices are now near the lower end of the channel. We have come across a pattern probably no defined in text books but is found at majority of junctures in Indian markets named as “h” shaped pattern. The reason for naming it as an “h” pattern is because the structure looks very much like this alphabet. This pattern is formed when a sharp down move is suddenly interrupted by sharp up leg which does not last for more than 3 to 4 days and later prices come back to test the previous lows. The lost made in August 2013 also formed this pattern. The above daily chart shows circled areas that exhibits this “h” pattern. It creates more pessimism then the previous low even if that is not broken. Even now the pessimism is widespread even when Nifty has not broken below 7667 levels. We look at this from contrarian perspective and the leaders that resulted into capitulation in previous week are not contributing in current fall! So stay alert in case there is sharp reversal.

Nevertheless, from trading perspective one should apply bar technique which suggests that for any positive attempt we should see close above previous bar high. So unless that happens one should avoid creating fresh long positions and let this pattern complete its course.

As shown on hourly chart, the current ongoing structure can be wave x which is forming a Flat correction or a Triangle pattern and prices are currently in wave b of this pattern. Now a move above 7930 will indicate that the ‘h” pattern is over and upside retracement has started.

In short, avoid catching a low as the line of least resistance is on downside and medium term trend is negative. Only move above 7930 will provide first positive indication and prices can then retest the highs of 8100 on upside. Next 1 to 2 days are crucial and will indicate if our reading of “h” pattern is correct!


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Video update: Elliottwave structure of Nifty and stocks on CNBC TV18

Watch the interview of Ashish Kyal of wavesstrategy.com with Reema Tendulkar & Mangalam Maloo on CNBC-TV18, in which he shared his readings and outlook on the market, specific stocks and sectors by applying Elliott wave technical studies.

Below is the verbatim transcript of Ashish Kyal's interview with CNBC-TV18.

Mindtree

"Within this strong downtrend we are trying to pick up midcap stocks that are outperforming. It is not an easy task but Mindtree  and Dishman Pharma  are stocks which are trying to hit the highs above the previous pivot high when index has been making lower highs. So this looks like to an outperformer and that is why we are recommending buy on that."

 "However, on Mindtree, if you look at the overall buying that is seen today, it has been in the IT space and this looks like to be in a good sector as of now which is outperforming. So Mindtree should be a buy with a stop loss of Rs 1,360, a strict stop loss has to be maintained at Rs 1,360 and we can see target around Rs 1,450 which is the previous pivot level," he said.

Dishman Pharma

"I also have a buy on Dishman Pharma. The stock is attempting to breach above its previous pivot high and has been making higher lows which is moving independent to the index, so the overall trend is positive. The stock can be bought with a stop loss of Rs 215 and the target of Rs 252 can be expected on the stock."

LIC Housing Finance

"The sell recommendation is on LIC Housing Finance  . The stock has been moving sharply lower. It looks like to be in the fifth wave right now. The trend started around Rs 525 level, so the fifth wave can breach the previous low of Rs 410 and then we can expect around Rs 402. So the target for LIC Housing finance is going to be around Rs 402 and the stop loss has to be maintained around Rs 440."

For any queries feel free to reach us at +91 22 28831358 / +91 9920422202 or mail us at helpdesk@wavesstrategy.com