Nifty: Power of Neowave pattern - Extracting triangle with Head & Shoulder, News do not drive the trend!

Nifty had continued to move with high degree of predictability even in the month of October irrespective of the overall events or news.

The below research is picked up from “The Financial Waves Monthly update” that shows the application of Neo wave – Advanced concept of Elliott wave and how knowing the pattern is most important fromTrading or Investment perspective.

Anticipated: Nifty daily chart – (published on 5^th October 2015)

Happened: as on 28^th October 2015

Below research is picked up from “The Financial Waves Monthly update” published on 5^th October 2015

Anticipated: “Indian Equity markets behaved exactly as expected in the month of September as well. We have been able to forecasts the trend for Nifty very accurately over past many months now. This simply shows the power of pattern if identified correctly.

As shown in Figure 3, after the sharp selloff in last week of August and early September, majority of the market leaders indeed protected their lows and bounced back. We are seeing pullback in start of October and this can continue for few days to two weeks in the form of wave f of Diametric Pattern.

Extracting triangle pattern in wave e: There is a slight modification in the internal pattern of wave e of Diametric. This modification can be seen in Figure 4. As shown wave e itself formed an Extracting triangle pattern. This is as per Neo wave which is advanced concept of Elliott wave. In an Extracting triangle pattern the strength on downside reduces and that on upside increases. We can see that wave (e) < wave (c) < wave (a), each of the downside legs were getting smaller and on upside wave (d) > wave (b). This pattern looks like an orthodox inverse Head & Shoulder which is also a precursor for accumulation. So intermediate wave e, of ongoing Diametric got completed at the low of 7690 on 29^th September and post that we are seeing upside move in form of wave f. This upside leg should consume around 10 days to 13 days and can travel towards 8300 – 8400 levels. In a nutshell, we expect Nifty to move higher and reach towards the zone of 8300 – 8400 in this up leg before the downtrend can resume. Participation from the sectors and market leaders near the zone of resistance will help us to gauge the overall structure. For now the path ahead is shown in Figure 4.” BANG ON!

Happened: Nifty formed a high of 8336 on 26^th October 2015 and reversed from there. It indeed reached the target and resistance zone mentioned more than 3 weeks back. The second chart clearly shows the path as expected and the way Nifty traveled.

Read further on why News does not drive the trend! Again this was mentioned in our research report

News do not drive the trend: The month of September was eventful with FED meeting to hike interest rates and RBI meeting to reduce the key policy rates. We have constantly highlighted in the short term research report published daily that FED will refrain from increasing the interest rates given the weakness that US equity markets exhibited. FED action is lagging stock market. It is interesting to see half of the world fighting against deflation and planning to raise interest rates whereas on other side developing nations like India has been worried about Inflation and reducing the key rates. Well before the RBI policy meeting we hinted towards the lenient stand that RBI will adopt with minimum 25 bps cut and Mr. Rajan obliged this time in predictable fashion atleast for us by adopting easy rate policy and cutting Repo rate by 50 bps. This was surprise to majority of participants but the selloff in Indian equity markets were pointing towards weakening economy and so the sharp rate cut. Again this was a lagging behavior by central bank! News or events do not drive the trend but it is strong trends in equity markets that put pressure on government for taking corrective measures!

To know more and trade or invest using the objective scientific techniques rather than relying on News subscribe to the monthly update for medium to long term view and short term update “The Financial Waves short term update”. Trust me markets do not move randomly and this time again majority of indicators have been aligned together which is not very often occurrence!

For subscription option visit www.wavesstrategy.com pricing page or write to us at helpdesk@wavesstrategy.com

Nifty RSI, Money Flow index, Channels all getting aligned together AGAIN! Stay alert!!

Bottom Line: Nifty managed to retest the previous pivot high near 8250. Short term trend is positive but the up move looks to be matured stage!

The below research is published in today morning research report "The Financial Waves short term update" by Waves Strategy Advisors. For subscription to daily Nifty and stocks Elliott wave counts visit http://www.wavesstrategy.com/Pricing.aspx 

Nifty daily chart:

 

Nifty 60 mins chart:

Wave analysis:

In previous update we mentioned that, “Second standard correction has been forming Extracting Triangle pattern where wave e (in red color) is ongoing. For this pattern to be valid wave e should not cross above 8300 levels.”

In Fridays trading session Nifty opened on Flat note and consolidated protecting the low of prior bar at 8130 till 1.30 pm. Post that there was sharp move on upside and Nifty closed near 8240 level. Bank Nifty finally showed upside strength in last day of the week and gained more than 1%.

Before August 2015 Midcap and Smallcap index outperformed and these sectors used to gain more than 2% or 2.5% during the day however the same sectors are gaining less now if we look at daily percentage gains. For example, in the last session Midcap and Smallcap has gained 0.50 and 0.20% respectively. This suggests that sector specific momentum has helped Nifty to move higher and hence one should not be too optimistic given the corrective nature of rally from the low made at 8690. Nevertheless, over near term prices have continued to protect the low of prior bar. So as long as we do not get close below prior bars low which is now at 8147 level daily bias will remain positive.

On daily chart we have shown Money Flow index (MFI) which takes into consideration participation of Volume in the ongoing trend. It is prudent to look at such indicators during the crucial juncture. We can see that in the past MFI has provided early warning signal. The same can be seen when Nifty made top at 9119 level and MFI exhibited negative divergence suggesting distribution was ongoing. Then again at the low of 7940 which was made in the mid of June 2015, MFI showed positive divergence thereby suggesting accumulation in that period. During the range bound action from July to mid of August 2015 in between 8655 to 8350 level, MFI exhibited decrease in Volume participation on upside and volumes increased during the down move. Coming back to current situation, in last session Nifty made high at 8246 levels however this is not confirmed by MFI as it is still struggling. This provides negative divergence so far.

Volumes are decreasing with the rise: During distribution phase volumes tend to reduce on upside and increases during the fall. MFI actually measures this objectively. Naked observation of volume also suggests reduction in volume over past few days. A positive breakout on reduced volume raises doubts on validity of a breakout. This week is going to provide more clues about overall maturity of trend.

Looking at channel resistance and Elliott wave pattern: Prices have been behaving as expected and this was also mentioned in past few days of research that one leg on upside is still pending. As per wave perspective, minor wave e of Extracting Triangle pattern is ongoing, so as the time goes, momentum will dry out on upside. Prices also have important resistance of channel which is now placed in between 8280-8300 level. We will look for alternate wave counts only if prices close above 8400 level which is the big red channel as shown on daily chart.

In short, Nifty has been reaching the inflexion zone. Strong momentum above 8300 is required to open further positive possibilities.  Any sharp move below 8145 followed by 8085 will confirm start of medium term downside trend.

Nifty has been moving very much in sync with Time cycles and Elliott wave. It is time to stay alert again and not get carried away. Prices are approaching the inflexion area and slowly the indicators are getting aligned… To ride the next BIG trend subscribe “The Financial Waves short term update”. Visit Pricing Page or Contact US for more details.

Nifty: Hurst’s Time cycle to predict Elliott wave pattern!

Time Cycles: Now coming to Nifty, we have applied 54 days cycle that has helped us to stay objective and catch reversals along with Elliott wave at times when the majority had been on the wrong side.

Let us see again the phase of the cycle that we are currently moving in as it will help us to understand the overall maturity of the recent up move.

Nifty daily chart:

Wave analysis:

The below research is picked up from the daily morning research report “The Financial Waves short term update”

Understanding Hurst’s Time cycle: As per Hurst’s Time cycle method there are predefined standard nominal cycles and we have to identify actual cycles that are in close proximity to it. On Nifty one such cycle that has worked very well is 54 days cycle which has helped us to capture important lows. Now as per this cycle the previous low was supposed to be formed on 1^st September but due to minor delay actual low was formed on 8^th September after 5 trading sessions. When analyzing time one should always give a leeway of 10% to the cycle. We therefore combine this technique along with Elliott wave and Channels to increase the accuracy for pin pointing the turns and at certain occasions exactly to the day.

Understanding Topping process: Time cycles are usually used to capture lows as it is synchronized but tops are dispersed. So accuracy takes a hit while trying to identify distribution but it still help us to understand the maturity of up move. Ideally a cycle reverses from middle of its period i.e. a 54 days cycle should top out at 27 days provided there are no other cycles acting (actually it is not the case and so prices do not top out exactly at the middle as many cycles are working on prices at every point of time). As per this method, considering the blue cycle shown on daily chart we are already in …….. days of up move and as per red (displaced cycle) we are now in ……….. days of up move. This means that either the cycle has already turned ……..or it should do so in next ……. trading days.

Also the next important low as per the 54 days cycle is going to be only in late ………

Predicting Elliott wave pattern using Cycles: Cycle analysis provide further clarity on the Elliott wave pattern and it confirms our stand that the ongoing up move is only wave ……. and Internal structure of this wave is shown on hourly chart (shown in actual research report)…

(A few of the text with crucial levels are purposely removed which are shown in the actual research report published in morning – The Financial waves short term update)

Nifty has been moving very much in sync with Time cycles and Elliott wave. It is time to stay alert again and not get carried away. Prices are approaching the inflexion area and slowly the indicators are getting aligned… To ride the next BIG trend subscribe “The Financial Waves short term update”. Visit Pricing Page or Contact US for more details.

Trading Nifty: NeoWave Diametric and Extracting Triangle patterns with Time cycles!

After capturing the strong down move in month of August and early September 2015, we were able to forecasts the reversal on upside when the majority were expecting 7200 but our objective techniques indicated an upside trend towards 8300 zone.

Following Nifty Neo wave chart was published on 30^th September 2015 in our weekly research report“Where to Invest NOW?”

Nifty daily chart: Anticipated on 30^th September

 

Happened:

Following was mentioned in the morning research report on 30^th September 2015 –

As shown in daily chart, we continue to think that Diametric pattern is in formation since the fall started from 8845 level. The down move in the month of August 2015 was in form of wave e of pattern which has formed Extracting Triangle pattern. This is one of the important pattern of the Neo wave where we generally see shift in the power of each waves. We can see that wave (d) was longer than wave (b) which touched the high at 8055 and post that short down move was witnessed in form of wave (e) which is further shorter than wave (b) and wave (d). So, this pattern indicates that downside strength has reduced and recent bounce back from 7690 has been suggesting that wave e might have completed and wave f of Diametric pattern has started.

Happened: Nifty moved higher in the form of wave f of the pattern and reached towards the resistance zone of 8300. Prices touched the high of 8245 on 12^th October and reversed on the same day. So it the time for medium term downtrend to resume???

Irrespective of the news outcome or events, index has been moving very accurately and following the pattern as per Advanced Elliott wave concepts. Subscribe now to the weekly and daily research report as after a period of boring non-trending move over past few days we are going to again get into a roller-costar ride very soon! Stay ALERT!!

For subscription options to daily research visit the Pricing Page or Contact US for weekly subscription to Neo wave report.

NSE Midcap index at crucial Fibonacci resistance of 61.8%, Bank Nifty continues to underperform

The below research is picked up from the daily report "The Financial Waves short term update" consisting of Nifty and 3 stocks along with Bank Nifty and Midcap index on periodical basis. For more details visit http://www.wavesstrategy.com/Pricing.aspx

NSE Midcap weekly chart:

NSE Midcap daily chart:

Wave analysis:

In the current up move of Indian Equities we witnessed that participation was seen in beaten down stocks whereas many of the outperforming Midcap stocks has lost upside steam and has been trading in sideways to negative action. During this scenario it is necessary to look at NSE Midcap index to understand medium term structure.

Above we have shown in weekly chart of NSE Midcap index which has been providing vital information. Since 2009 prices have been intact in upward moving channel.  We can see that this blue channel has been working brilliantly. The top made at 14500 level in the mid of August 2015 is exactly at the zone of channel resistance. Moreover the down move witnessed from 14500 to 12130 has retraced the last leg of up move in faster time. This provides time as well as price confirmation that important top has been made in this index which will not be taken out for next few months. This is one of the reasons behind why Midcap and Smallcap stocks are not showing much strength in the current up move.

Importance of 10 and 20 weeks Exponential Moving Average: During the entire rally witnessed from mid of 2013 till August 2015, 10 weeks EMA (red color) sustained above 20 weeks EMA (blue color) and prices continued the up move. However after span of 2 years, for first time 10 weeks EMA has moved below 20 weeks EMA which suggests that the trend might be reversing to downside.

Indication from Money Flow index and MACD: Money flow index takes into consideration price as well as Volume to judge the strength of weakness of any trend. We can see that from mid of 2014 Midcap index continued to move higher with lesser momentum and Volume were decreasing constantly. When prices made a high at 14500 level, Volumes were drastically lower as compared to previous peak. This is providing the early indication that up move was with lesser participation and also suggests that best of the up move has been done in this index. Weekly MACD has been constantly failing to move above blue line and reversing on downside. This also suggests that momentum has been slowing.

As shown in daily chart, in the mid of August 2015 prices completed minor wave a at the low of 12130 and post that minor wave b is ongoing which is now close to the 61.8% retracement of the prior down move which is now placed at 13500 level. Any sharp down move below 13000 will provide the first confirmation that minor wave c on downside has started. For further confirmation prices need to break 12130 level.

In short, we do not think major up move is possible in Midcap index from current level based on Elliott wave theory, Exponential moving averages, MACD, Money flow index and Fibonacci retracements. Hence one should trade in Midcap and Smallcap stocks with strict risk management. Move below 13000 will indicate that move towards 12130 has started. Further move below 12130 will indicate medium term negativity.

Subscribe now for updated views along with Elliott wave structure on Nifty, stocks and other indices. For subscription options visit -  http://www.wavesstrategy.com/Pricing.aspx 

Nifty: Neowave Diametric Pattern with Time cycles – Advanced Elliott wave concepts for forecasting trend!

Neo wave has more number of patterns when compared to Elliott wave.

Also there are more than 15 rules in order to identify an impulse pattern. When more number of rules are applied the accuracy increases drastically but also the complexity. There are a few new patterns that are missing in orthodox Elliott wave – Diametric, Extracting Triangle, Neutral triangle, etc. These are very important pattern as majority of the indices are exhibiting this structure. Look at the Nifty chart shown below and how the pattern recognition helped us to forecasts the trend:

Nifty daily chart shown on 3^rd July 2015 monthly research report

Happened: Nifty daily chart showed on 5^th August 2015 monthly update

Happened: Nifty daily chart shown on 4^th September 2015

Happened:

The above charts clearly show that by identifying the pattern earlier on we have been able to very accurately predict the movement of Nifty over past many months. I do not say that the accuracy can be this high everytime as it is all about probability but as long as prices behave as per the pattern forecasted it is prudent to stick with it unless there is deviation from expectations.

Also note that all of these months have been very eventful right from results, China Yuan devaluation,  FED meeting, RBI meeting and much more. Irrespective of these events or news prices continue to move as per the path forecasted for more than a month before in our monthly research report “The Financial Waves Monthly update”.

Now below is a brief excerpt from the 4^th September research report when majority were bearish but we refrained from taking that stand and warned our clients that upside reversal is imperative – “Market leaders are not participating: During the fall in form of wave e the major draggers were commodity stocks – Tatasteel, Hindalco, Industrial stocks – Reliance Industries, ADAG group stocks, Realty stocks like DLF, HDIL, etc. However, each of these stocks has not taken out their respective lows made on 25^th August. The pressure continues to be strong on Banking index that majority expected to strongly outperform just few months back and is now the major dragger. Internal behavior of the leaders protecting the lows is indicating that the downtrend is now in matured stage over short term and there can be upside pullback. Nevertheless unless we see a close above the previous week’s high it is better to avoid catching a low.”

Indian Equity markets behaved exactly as expected in the month of September as well. We have been able to forecasts the trend for Nifty very accurately over past many months now. This simply shows the power of pattern if identified correctly.

As shown in Figure 3, after the sharp selloff in last week of August and early September, majority of the market leaders indeed protected their lows and bounced back. We are seeing pullback in start of October and this can continue for ………….. in the form of wave f of Diametric Pattern.

To know what is next from here in the form of Diametric pattern irrespective of the news or events subscribe now to “The Financial Waves Monthly update” which covers outlook on Nifty, Gold, Silver, USDINR, Global markets, much more. Also get access to daily short term research report “The Financial Waves short term update” Subscribe by simply visiting Pricing Page or Contact US for more details.