Happy New Year 2016!!!

Bank Nifty: Time cycles working precisely for many years! Will it work again?

Time cycles are important concept that we combine along with Elliott wave / Neo wave to get high conviction trade setups which help us to be against the crowd at major turning juncture.

Year 2015 has not been good for Indian Equity markets and especially for Banking stocks that have drastically underperformed. This year will be marked as the year of correction.

The fall on Nifty has been similar to that of the fall of 2011 which was mentioned in previous article along with detailed research given in previous week’s daily research report.

Bank Nifty daily chart with Time cycles:

The above daily chart of Bank Nifty shows that prices have been moving in downward correction since January 2015. This index topped out before Nifty and both indices continued to move lower. However, recently Nifty came very close to its low made on September 2015 near 7545 whereas Bank Nifty has continued to stay at much higher levels compared to its low made in September 2015. This indicates outperformance of Banking index which has been providing leading indications.

Time Cycles: have been working very accurately for past many years on Bank Nifty. This important cycle is now again due and given the outperformance of Banking index there is high likelihood we are close to the important lows.

Neo wave:  Diametric pattern is one of the most important patterns described as per advanced Elliott wave concept – Neo wave and the entire correction since the high of January 2015 might have formed a Diametric pattern. For accurately timing it is prudent to look at the internal structure of this pattern along with key resistance levels that should be broken for strong positive confirmation.

As this is free article section we will not be able to indulge into detailed Elliott / Neowave counts and key levels that will confirm strong positive reversal.

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Nifty Fractal nature: Astonishingly similar Fall of 2011 and 2015, to capture next major trend!

Bottom Line: Nifty is in range. Break above 7855 or below 7730 is required to see trending move.

            

Nifty daily chart:

Nifty daily chart: Fall of 2011

Nifty daily chart: Fall of 2015

Nifty 60 mins chart:

           

Wave analysis:

In the last trading session, Nifty traded in red territory for the first few hours and post that bounce back was witnessed towards 7846 level but prices failed to take out the resistance of 7855 level and moved lower towards 7776 level. This has been keeping the near term trend of Nifty in range.

Power of Fractal: Elliott wave is based on the paradigm that freely traded markets exhibit fractal nature and patterns tend to repeat. It is this power that gives us predictability and value to technical analysis. It has been many times we have been comparing the fall of 2015 with that of fall of 2011. It is prudent at this stage to see both the charts together and try to see the key areas of reversal.

Nifty daily chart: Fall of 2011 shown above clearly exhibits complex nature of fall and how it was confined within the downward sloping red channel.

Nifty daily chart: Fall of 2015 - The current fall is of very similar nature with a channelized correction between red lines. Also the violent move seen in last week of August 2015 very closely resembles to that of the fall of August 2011. There is absolute no difference in the serious selloff seen during both of these scenarios. In both 2011 and 2015, post the fall of August we saw an upward swing towards the channel resistance and then during the final down leg Nifty formed an Ending diagonal pattern – Wedge shaped correction in 2011 and it is very much looking like forming a similar wedge shaped pattern even now.

The similarity of pattern doesn’t end here. It is extended to the indicator as well. Look at RSI during the final stages of correction in 2011 and also at RSI currently. There has been a clear positive divergence and double bottom retesting the 30 zone.

Post pattern implication: If our reading of the similar pattern is correct than we can expect a similar outcome that was seen after completion of 2011 fall. There was a strong rally witnessed in early January 2012 that resulted into more than 1000 points of up move. (Just for reference this up move was predicted near the lows in the daily research published during 1^st week of January 2012 before the rally started and can be shared for reference). We will not be surprised even this time to see January 2016 forming a very important low and then a strong trend on upside emerges. However, one should wait for positive confirmation and higher high higher lows formation on daily scale to confirm reversal in a yearlong downtrend.

We took strong cautious stand when Nifty touched 9119 in March 2015 and warned about the upcoming correction on downside. Things are now repeating in similar fashion but in opposite direction.

One important difference: During the final stages of fall in 2011, prices came close to the lower end of the red channel however, in the current fall the red channel is now near 7450. I do not think Nifty will be going this far on downside and will probably protect 7540 levels but it cannot be completely ruled out.

In a nutshell, if our reading about Fractal nature and Time cycle is correct than we are in final stages of down move that started in March 2015 and post its completion we should start seeing a strong uptrend to emerge. The up move in early 2012 was more than 1000 points when Nifty was at 4500 levels. I do not want to get extremely optimistic but a strong break above 7980 will be first sign of positive breakout.

Over short term, one minor push on downside is plausible and it will be only on faster retracement above last falling segment i.e. above 7980 followed by 8100 we will get both Price and Time reversal! 

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Video Interview: Impact of Dollar Rally and FED hike to global markets

Fed decision, Hong Kong, Chile and Mexico have all raised rates. Watch the exclusive interview of Ashish Kyal, CMT discussing technical views on USD/JPY, US Dollar, Argentina stock index, USD/CNY 

To watch the full video visit here- www.wavesstrategy.com/AshishKyal

For subscription of Equity, Commodity and Forex Services please visit Pricing Page on www.wavesstrategy.com or any other query Contact US

Nifty continues to trade in complex Elliott wave correction..All eyes on FED meeting!

Bottom Line: Nifty continues to trade near the important red channel support as shown in 60 mins chart. Next few days of price action will be crucial now.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In the last update we mentioned that, “due to sharp rise followed by sharp fall we have applied Bollinger Bands which is contracting as of now. Prices are trading near the support of lower Bollinger Bands as well as the zone of channel support. Only decisive move below 7540 will indicate that downtrend is extending further.”

Last trading session was highly volatile where Nifty had Gap down opening at 7550 level but managed to protect important support of 7540 and showed recovery on upside towards 7650 levels immediately. The most awaited US Federal reserve’s meeting is scheduled on 15-16 December and it is expected that US will raise key policy rates in almost a decade. It is going to be an interesting event and the way global markets will react over short term. Few weeks back when FED chairman Yellen announced most likely hike in December US equity market – DJIA was up by more than 300 points on same day. It is tricky to gauge equity markets reaction to the news but better to understand that markets will eventually do what it has to irrespective of the event.

Case in point: It is going to be a volatile week and we think FED will be increasing interest rates this time. The reaction can be positive but we will let market decide where it wants to head. The Global markets are going to react atleast during opening session in similar fashion to that of US equity markets with a big Gap. So trade light and close over next two days is going to be crucial. Nifty is also near the crucial 7540 level of previous low made in September which it protected yesterday.

From sector perspective, Bank Nifty which was the major loser in Friday’s trading session managed to trade in a range but buying is still not witnessed in Banking stocks which is little concerning. Midcap and Smallcap indices closed in the green territory.

Now as per Elliott wave pattern Nifty is moving in second correction post wave x as shown on daily chart post completion of which we should see break above the channel. However, the fall has been in complex pattern and it will be only above 7800 we will get break above the channel providing first positive confirmation and faster retracement above 7985 will provide second stage positive confirmation that medium term trend has reversed on upside. This method is known as 2 stage confirmation as per Neo wave which virtually confirms a strong reversal over medium term.

Now coming to short term we can see some buying emerging from lower levels near the channel and Bollinger Bands support as shown on 60 mins chart. The internal structure is not clear and it is crucial to see break above 7770 or below 7540 for a clear trend to emerge.

In short, expect Nifty to trade in a range between 7540 and 7770 over short term. Break of these levels will result into trending move in that direction. We are keeping a close watch on Banking index as it has still not showed any positive signs and of course even on FED meeting outcome which will drive global markets atleast over short term.

The above strategies are mentioned in our daily research report “The Financial Waves Trading update” that covers in-depth analysis on Nifty using Elliott wave and trading strategy. In case you would like to know the trend for stocks as well subscribe now to “The Financial Waves short term update” that covers Nifty and stocks outlook.

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Is Bank Nifty forming an Extracting Triangle pattern as per Neowave?

Neowave is advanced Elliott wave concept with newly evolved patterns like – Diametric, Extracting triangle, etc

Below is the literature on ideal Extracting Triangle pattern:

The unique aspect of this Triangular sub-category is that the alternation that is normally present in a Triangle (based on which wave is the longest) is reversed. This creates a VERY strange looking formation that can be very difficult to anticipate (at least if your experience is primarily in the 80’s bull market, which had a completely different character). The only early warning behavior characteristic I have been able to find relates to wave-b. When the b-wave of what looks like a Zigzag takes less time than waves-a or c, an Extracting Triangle is likely.

Now look at the below two charts – Bank Nifty pattern and Ideal Extracting Triangle pattern:

Does it mean that Bank Nifty should reverse from here?

The above chart of Bank Nifty resemble to that of Extracting triangle pattern as of now but this does not mean one should start bottom fishing and try to catch a low. It is better to wait for two stage positive confirmation as per Neowave.. i.e. faster retracement above the last falling segment.

To know the key levels that can confirm a positive reversal rather than catching a low subscribe to “The Financial Waves short term update” – daily research publication covering Nifty, periodical Bank Nifty and stocks.

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Nifty Neo wave Diametric pattern continues in its final stages. A major trend is about to emerge!

Neo wave is advanced concept of Elliott wave with new patterns like Diametric, Extracting Triangle, Neutral triangle, etc. These new patterns are very important as majority of movement atleast on Nifty has been based on Diametric pattern:

Look at the below research which is picked up from “The Financial Waves Monthly update” that provides medium to long term forecasts on Nifty, Currency, Commodity - Gold / Silver, Global markets along with inter-market relationships. This is one of the most comprehensive research using Elliott wave.

Figure 2: Nifty daily chart – Anticipated on 5^th November 2015

Figure 3: Nifty daily chart - Happened

(Complete Neowave labels are shown in actual report)

Below research is part of the monthly update published to the clients on 5^th December 2015.

In previous monthly update published on 5^th November 2015 we mentioned the following: “First thing first, for now the cycle analysis along with Neowave Diametric pattern continue to suggest that the downtrend should continue for two to three weeks and any pullback is going to be temporary…. Path Ahead: As shown on daily chart, we have shown the probable direction of Nifty with increase in downside trend as the time cycles are in sell mode. However, magnitude of correction can vary…”

Neowave Diametric Pattern continues: Nifty behaved in synchronized fashion as expected but the magnitude of the fall has been subdued. We mentioned in previous update as well that the magnitude of correction can vary but the direction has been spot on even this time with prices moving down from 8100 towards the level of 7715 in just few days after the last publication. 

Nifty has now shown 8 months of correction from the highs of 8845 made in April 2015. We have marked April high as termination of previous up leg and not 9119 as per pattern analysis. The medium term downside trend post April has now arrived near its final stages which is wave g of Diametric pattern. To refresh again Diametric is a 7 legged pattern (a-b-c-d-e-f-g) with each legs in corrective formation. We captured the formation of this pattern very early when prices were in wave c itself and updated it in May – June updates.

During this entire down move Time cycles have also worked extremely well by helping us to determine the major reversals on monthly basis. Detailed explanation of ……. days and ….. days Time cycle is given in previous update. We are now near the latter stage of down move both as per Elliott wave pattern and Time cycle.

Internal pattern of wave g: Figure 3 shows internal structure of ongoing wave g and it looks to be forming ……………. pattern itself of one lower degree. The fall of entire 2015 is similar to that in the year 2011. The last leg during 2011 correction also formed a very similar wedged shaped pattern as per the path shown in the daily chart above. There is high likelihood we will form truncated lows despite the negative news prevailing across and then ………………..

(The actual report shows complete description of pattern and Time cycles)

We have arrived near crucial juncture again. To know the path ahead and the direction of major breakout subscribe to “The Financial Waves monthly update” We have been spot on for more than a year now and if we are right again then this is something you cannot miss….

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Nifty: Application of Bollinger Bands® Elliott wave structure and Momentum for capturing intraday reversals!

Nifty has moved sharply lower after coming close to the psychological level of 8000. During the up move of 9 days from 7725 levels there were only a few stocks from the index that participated and majority of the stocks moved in a range. Also the momentum was not picking up which was measured using RSI indicator. A few of the technical studies helped us to stay alert and not get carried away in the 9 days of slow up move. We were constantly talking about weak momentum and warned our subscribers that one minor push on downside cannot be ruled out before we bottom out.

See yourself below from the chart of Nifty picked up from daily research report “The Financial Waves short term update”

Nifty 60 mins chart: (published on 2^nd December 2015)

Happened: as of today 2.50 pm

           

Wave analysis:

Following was published on 2^nd December 2015 in the morning:

In previous update we mentioned that, “Today there is RBI Monetary policy meeting. In the last meeting of 29^th September 2015, Mr. Raghuram Rajan has already reduced the key policy rates, so this time there is high probability that Status Quo will be maintained.”

As expected RBI kept the policy rates unchanged. ..Yesterday was another day where prices failed to generate the momentum even after taking out the high of prior bar of 7966 level. During the strong trend momentum increases on upside as trend goes further however in current trend momentum has not picked up yet. These are the conflicting signals which indicate that one should stay alert in case of sharp reversal.

On short term charts also Bollinger Bands have contracted which suggests that ongoing trend is not strong till now. We have been mentioning this because during the strong trend Bollinger Bands tends to deviate or expand from the mean which we have not seen till now.

In short, outlook remains the same that Nifty has been failing to generate the momentum on upside. Strong hourly close above 7970 is required to continue the up move in form of wave (x) however any move below 7865 will be the sign of negativity.

Happened: Our cautious stand has been vindicated and as soon as the support level of 7865 was broken there the downtrend resumed.

I have observed that as long as the pattern is clear predictability is high and one can indeed capture the swings irrespective of events. We are now again approaching towards the time zone where slowly the indicators are getting aligned together but this time not on downside! Yes, we have captured brilliant moves on downside but this time the indicators are slowly shifting their direction to up and so is Time cycle.

To know why we are now arriving at crucial juncture subscribe to “The Financial Waves short term update” and see yourself how most basic indicators can also be used for the best of the intraday trade setups. For subscription options visit Pricing Page and select Equity research report, pay online and get instant access NOW!

We predicted Commodity Crisis more than a YEAR back using Elliott wave!

The ongoing bear market in Commodities continue to be the lime light from last few months and many experts have been now citing the possibility of Commodity Crisis.

However, more than a year before we published in our Monthly research about Upcoming Global commodity crisis. The part of the same is shown below:

Anticipated in the month of October 2014: in “The Financial Waves Monthly update”

“CRB Index is a commodity future price index. It is currently made up of 19 commodities which are quoted on various exchanges like NYMEX, CBOT, LME, CME and COMEX. The 19 Commodities includes Aluminum, Cocoa, Coffee, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lena Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, Silver, Soyabeans, Sugar, Unleaded Gas and Wheat. Thus it includes petroleum based products, Liquid Assets, Highly Liquid Assets and Diverse commodities.”

CRB Index weekly chart: (Anticipated in the month of October 2014)

 

CRB Index weekly chart: (Happened till 5^th November 2015)

(Part of research taken from the Monthly report published in the month of October 2014)

“The current year of 2014 is again of plenty of news where we have witnessed drastic fall in various commodities like Crude oil which is trading at $78 from the highs of $107 made in the month of June 2014, Comex Gold is trading at 3 years low at $1167. CRB index is the best representative to understand the trend of Commodity and forecast where is the world commodity market headed.

In the month of October 2013, we published the following in the research on CRB Index where it clearly suggested that there will be no relief sign for commodities and down trend is likely to continue in coming years.

The recent down move has broken below triangle pattern along with Head and Shoulder which is classic reversal pattern. This suggests that wave Y has started on downside and there are no relief signs for Commodities as of now. On upside 310 will act as an important resistance now and as long as this level is intact trend remains bearish.

On downside prices can move towards 200 levels where low of 2009 is placed along with triangle target (as shown by horizontal line).

In short, CRB index looks weak at current levels. Prices can move towards 200 levels over medium term. This index clearly suggests that further selloff will be seen in Precious metals, Base metals and Energy. 

Happened: Here we are when everyone is talking about the Commodity crises after it has happened. CRB index touched the target of 200 levels in the month of November 2015. The above research clearly shows the power of knowing Elliott wave pattern and how it helped us to capture the crash in commodity prices when majority were expecting hyper inflation! Interesting, Isn’t it!

During this entire down move since we mentioned about the upcoming crises:

MCX Crude prices moved lower from 6000 to 2500 levels

MCX Copper moved lower from 420 to 300 levels

MCX Zinc moved lower from 142 to 103 levels

MCX Lead moved lower from 130 to 103 levels

The above research clearly indicates how we are ahead of the crowd by following objective tools on different asset classes to forecast the path ahead. Subscribe to “The Financial Waves Monthly Update” and get to know what is happening in various asset classes. For more information visit Pricing Page.

 To know the short term trend of Nifty and stocks subscribe “The Financial Waves short term update”and for Commodity research on Gold, Silver, Crude, Copper get access to “The Commodity Waves”. Elliott wave and technical analysis is the most objective way using which you can trade or invest and we have our proof!

Equity currency correlation, USDINR movement as per path shown in monthly update..!!

Correlation between Equity and Currency: Indian Equity market has continued to be under pressure over past few months. USDINR has high correlation with Equity markets during major turning juncture. However, magnitude of this correlation varies. Also the correlation depends on the period of trend. Over long term USDINR and Nifty both have moved towards unchartered territories. However, over medium to short term one can see that the reversal in Nifty is also associated with reversal in currency pair. So continued selling pressure over next few weeks in Equities will keep the trend on upside for USDINR.

Dollar showed its appreciation against Rupee which was anticipated well in advance with the help of Elliott wave theory and other technical tools and part of the research is shown below.

USDINR daily chart spot: (Anticipated on 5^th November 2015)

USDINR daily chart spot: (Happened till now)

For USDINR, in the previous monthly update we mentioned that, “short term appreciation is possible in INR for move towards 64.30 levels and then this pair should depreciate again and cross 67 mark.”  

USDINR has been moving in lines with our expectations. Prices showed appreciation towards 64.62 (spot) level and protected our mentioned level of 64.30. Post that prices have been depreciating and trading at 65.75 level.

Medium term outlook on USDINR: The weekly chart of USDINR shows that since mid of 2011 this currency pair has been moving higher in form of intermediate wave C. Within this, minor wave iv has completed at 58.20 (spot) levels and since then minor wave v has been running its course on upside. The internal structure of wave v has been corrective in nature and thus it indicates that Ending Diagonal Pattern is in formation. Nevertheless, as long as 63.50 (spot) is intact on downside, medium term trend for USDINR remains on upside i.e. INR should continue to depreciate over next few weeks.

Moving average: Recently prices have bounced back from the channel support and have been protecting the 100 weeks Exponential moving average since second half of 2014. From last 2 weeks prices have been protecting the prior bars low on closing basis and giving positive close.  Hence channel support, Exponential moving average of 100 weeks and weekly bar formation indicates that short term appreciation of INR against Dollar has completed and now depreciation can continue in the coming weeks.

In short, weakness in Indian Equity Market along with wave counts and channel support indicates that USDINR can move higher towards 67 mark in the coming weeks. As long as 63.50 (spot) is intact on downside, medium term trend for this currency pair will remain on upside.  

Happened: USDINR moved in lines with our expectation and has made high of 66.90 (spot) recently. What should we expect now?

Subscribe to “The Financial Waves Monthly Update” which covers research on Global Equity Markets, Commodities, Currencies providing medium term outlook for the same. For more information visit Pricing page