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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