Nifty: Application of ADX indicator, Andrew Pitchfork, Channels, Moving average difference

Bottom Line: Nifty moved in a narrow range in yesterday’s session. Short term trend will continue to be positive with 7820 as important support. 

Nifty daily chart:

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In previous update we mentioned that “Close above 8000 will result into positive trend towards the channel resistance placed near 8150 - 8200 levels with yesterday’s low near 7820 as an important support”

Nifty did hit new high for 2016 by touching 7991 levels on intraday basis. The movement continued in stock specific manner with Banking index that was leading the way up showing some correction in previous session.

During such times it is important to apply different techniques and see if momentum is building up or not for much higher levels. The first daily chart of Nifty shows modified blue channel which is connected from the unorthodox top given the fact that correction on downside as per the wave theory started from that truncated high made in April 2015 at 8845. The next resistance zone as per this channel is now near 8150 levels.

Also, Moving average difference indicator shown below is now at a difference of 150. The strongest of the momentum was seen on 28^th January 2015 with MA difference value of 270. It will be only on decisive break above 8150 followed by reading of 270 on MA difference indicator that will indicate the index is indeed headed towards much higher levels even if it is in corrective fashion.

ADX Indicator: This indicator measures if a trending move is about to emerge. We can see that the value of this indicator continued to move lower during the entire uptrend until recently. A sharp fall followed by a rise results into a non trending move over medium term and so we are seeing such lower value on ADX. A continuous rise on Nifty above 8150 will probably break the value of 25 – 30 which normally signals a trending move.

Andrew’s Pitchfork: A very important channeling technique that plots the channel based on standard deviation and mean trend is shown in red color. The entire up move is contained within this red channel. Break below 7820 will break the lower trendline and provide first negative confirmation. But as long as this level is intact short term trend will continue to be positive and move above 8000 will provide further confirmation.

Over short term, as shown on daily chart, it is not clear if wave (b) is indeed over or not. Today being the expiry volatility around this psychological level cannot be ruled out. Decisive move above 8000 can result into short covering that can drive the trend towards the channel resistance again placed near 8150 – 8200 zone.

In a nutshell, all of the above indicators are pointing towards 8150 – 8200 as very important level on upside. Strong break above these levels along with extreme reading on momentum indicators will confirm that the medium term trend is extending further from here. Failure of prices to cross this zone and divergences on various indicators from here on will send across cautious sign. Next few days of price action will provide a clear conclusion. For now, over short term break above 8000 will continue the short term positive trend towards 8150 with 7820 as important support.

“The Financial Waves short term update” research report is published on daily basis that shows detailed Elliott wave structure applied along with other technical tools and advanced concepts on Nifty, Bank Nifty, stocks. For subscription options visit Pricing Page.

Nifty: Can you identify an impulsive or corrective pattern?

Elliott wave is all about recognizing the patterns. The first level of pattern segregation is to understand whether the rise is impulsive or corrective. An impulse pattern should consists of 5 sub-waves with waves 1,3, and 5 traveling in direction of the bigger trend and waves 2 and 4 correcting the prior impulse trend. Also as per basic Elliott wave following are the three rules that should be followed:

1. Wave 2 cannot retrace complete of wave 1

2. Wave 4 cannot enter into territory of wave 1

3. Wave 3 cannot be the shortest among the impulsive waves 1,3,5

When all of the above basic rules are followed then the pattern qualifies for an impulse pattern as per basic Elliott wave. Using Advanced Elliott wave – Neo wave a valid impulse pattern has to follow more than 15 rules. For now let us focus only on the basic rules and see if Nifty has been showing impulsive or corrective rise:

Nifty 60 mins chart:

The above chart of Nifty shows the rise from the lows of 6825 which is channelized. Now try to identify the pattern!

The rise does not have 5 waves following even the basic rules of Elliott wave forget about applying the advanced concept of Neo wave for pattern identification.

So the pattern is corrective. Now we have to identify whether it is a Zigzag, Flat, Triangle or Complex correction. Looking at the number of subdivisions and overlapping structure there is high probability that the complex correction is under formation. The next step will be to label the complex structure with internal counts. Always remember that pattern takes precedence over internal wave counts.

Now when you understand the pattern can you systematically label the internal counts which will in turn help in taking trading decision?

“The Financial Waves short term update” research report is published on daily basis that shows detailed Elliott wave structure applied along with other technical tools and advanced concepts on Nifty, Bank Nifty, stocks. For subscription options visit Pricing Page.

Nifty can continue to consolidate before a strong trending move!

Bottom Line: Nifty failed to move above the zone of 7980 – 8000 as expected and drifted lower. Short term trend will be sideways to negative.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

Nifty traded in red territory from the opening hour itself. Prices failed to show any positive attempt and broke previous week’s low as well. This confirms that the short term retracement of the up move from 7517 to 7980 has started.

As shown on daily chart, we have been bullish all the way from 6900 levels and turned cautious after seeing the corrective rise. An impulsive up move requires 5 waves internally that follows the impulse rules. Failure to show such internal counts indicate that the up move from 6825 can be a part of ongoing correction that started in March 2015.

The pattern that has tendency to break the trendline and still fails to show momentum is triangle. So there is a possibility that post the wave X seen near 8340 in October 2015, triangle pattern is ongoing and we are now in wave b of this pattern which is internally forming double correction in form of (a)-(b)-(c)-(x)-(a)-(b)-(c) as shown on daily scale. Also we can see respect for 76.4% Fibonacci level along with previous minor wave x from where the current up move has reversed. This level was mentioned few days back itself and prices are giving due respect to it.

Over short term, the up move in form of wave (a) from 7516 to the high of 7978 took approximately 5 days and so we should see wave (b) to continue atleast for 5 days or more. Wave (b) is now only 2 days old and it seems the high of 7980 should not be taken out atleast in this expiry which is also in sync with highest OI buildup at the psychological level of 8000 on upside.

In short, Nifty can continued to drift lower towards 7750 levels in form of wave (b) before the final push on upside in wave (c). Post that the downside pressure should start building up! 

So, where Nifty is heading now? Subscribe to “The Financial Waves Short Term Update” which covers Nifty and 3 stocks with in-depth research. For subscription visit Pricing Page

Trading Nifty based on RSI and Channels! Will mean reversion continue?

Equities have been all over the places over past few weeks. Prices have been moving sharply in one direction but only to reverse back later. During such times when there is more of mean reversion to the average rather than a trend it is better to adopt different trading technique.

Below is 60 minutes chart of Nifty that shows Channel along with RSI and Exponential Moving average:

The strongest of trend was seen post the Budget session on 29^th February which lasted for only 3 days. After that the trend has been nothing but sideways with slight drift on upside.

Nifty 60 minutes chart:

As per mean reversion technique whenever prices move away from the average by a specific amount it is time to take opposite stand. However, this technique can be dangerous if a strong trend is about to emerge.

Now trading based on RSI works well during such scenario provided we have a channel to confirm the reversal zone on prices.

On above chart you can observe that RSI has been finding strong support near 30 and every time RSI reached near this zone the trend reversed back on upside. On the other side it has been 75 to 82 zone from where we have seen reversal on downside. Also such reversal has happened after a strong close or very weak close in previous session from channel support or resistance….

This gives important information on which technique is currently working. But please remember in case a trending move emerges one need to again change trading method.

Next one or two days of price action will confirm if market is still in non – trending environment following the mean reversion or it is now going to deviate significantly away from its average! These are interesting times so stay tuned!

“The Financial Waves short term update” is our flagship product that covers Nifty, Bank Nifty, stocks on basis of Elliott wave, Time cycles and advanced concepts of Technical analysis. The research report is published daily before the market opens and provides charts along with explanation on Nifty and three different stocks. For subscription visit  Pricing Page

Neo Wave Chart of the Day - Just Dial

Just Dial has shown strong momentum with prices moving higher from 360 levels to 850 in just few weeks.

Just Dial 60 minutes Neo wave Chart of the day:

Neo wave pattern: Prices are moving in double Zigzag pattern involving wave x that completed near the lower trendline of the channel. Will the second corrective pattern tend towards equality with the first corrective? A perfectly channelized move so far following Neo wave pattern!

Applying Time Cycles -Sun Pharma gets approval from USFDA but is it already discounted?

The Pharma sector has been moving in doldrums from last one year. Due to USFDA quality issues companies such as Sun Pharma, Lupin, Dr.Reddy, Cipla etc. has shown sharp down move. Lead by this Pharma sector is underperforming from last one year. However, after many months some good news is here where Sun Pharma has got approval for eye inflammation drug recently. The stock reaction in today’ session is neutral where prices are consolidating between the range. Now question arises will stock show trending move in next few days and if yes then in which direction? We believe that news only creates short term spikes but post which trend should start in the direction of ongoing move. So what to expect next for Sun Pharma? Below part of research is taken from today’s “The Financial Waves Short Term Update”:

Sun Pharma weekly chart:

(Part of research taken from today’s research report)

Wave analysis:

Since the start of 2015, Pharma index has continued to move in down trend. This sector was outperforming prior to 2015. However, now the story has changed as underperformance has continued from last 1 year. In previous month when recovery was witnessed broader indices, Pharma sector continued to tumble and lost more than 12%. We have picked up Sun Pharma which has reversed on downside from the crucial channel resistance.

The above weekly chart indicates that prices are intact in downward moving channel and forming negative bars. 20 weeks Exponential moving average has continued to sustain below 50 weeks EMA which indicates weakness. Moreover 26 weeks Time Cycle has been working well to capture the tops. Same cycle is due now which indicates that one should remain cautious as prices can move lower sharply. From medium term perspective, stock has important resistance at 900 levels.

In short, Sun Pharma structure is weak. Any move ………….

To know the outlook on Indian Stock Market and different stocks, subscribe to “The Financial Waves Short Term Update” and for more information visit Pricing Page

Stock tips and Nifty trading strategy by Ashish Kyal on Zee Business

Following is the brief interview transcript Ashish Kyal had on Zee Business at 12.30 pm, providing stock tip and trading strategy on Nifty

Q: What should be trading strategy on Nifty given the pressure seen over past 2 days?

A: Nifty has failed to sustain above the important support mark of 7600 and also broke below the previous pivot low. This will keep the short term trend negative and it is therefore advisable to use sell on rallies strategy rather than buy on dips. One can initiate shorts keeping a strict stop of 7690 and target of 7450 levels.

Nifty hourly chart:

Q. Any stock in buy or sell will you recommend. Since the outlook on market is negative will you prefer giving a sell call?

A: As the overall trend looks negative for now it is better to short the underperforming stock. HDFC has been moving lower and is one of the worst performers in today’s session. Also the stock has broken the important support zone of 1090 which is the pivot level. One can therefore sell this stock on rallies keeping 1120 as strict stoploss and for the target of 1020 which is close to the previous pivot lows.

HDFC Hourly chart:

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Tech picks BEML, Federal Bank, Colgate Palmolive, Auro Pharma by Ashish ...

Ashish Kyal of wavesstrategy.com recommends selling BEML, Federal Bank and Colgate Palmolive and advises buying Aurobindo Pharma in an interview with CNBC TV18. Subscribe to positional / intraday stock tips by visiting wavesstrategy.com or contact on helpdesk@wavesstrategy.com / +91 9920422202

Why Nifty is falling? Irrespective of RBI stand!

RBI cut the repo rate by 25 bps and tweaked other key parameters as well. Many would now be citing that only 25 bps cut instead of 50 bps and also weak global market resulted into the sharp selloff. But important thing to observe is that this reversal has come after prices came very close to the multi-year trendline shown in below chart.

This simply shows at times it is important to see price action near crucial resistance lines before taking any stand. Also Nifty has now reversed from important levels with strong momentum. So will this fall continue from here on or is it just a temporary glitch?

Nifty daily chart:

For a strong medium term trend reversal and two stage confirmation as per Advanced Elliott wave – Neo wave we required very clear break above the multi-month trendline which has not happened. Also the entire rise has now become in 3 waves instead of 5. An impulsive pattern consists of 5 waves whereas corrective legs move in overlapping fashion. Failure to see a clear 5 waves development indicates that the up move was only corrective in nature.

Does it mean that the buy on dips market is now changing to sell on rallies?

To confirm this scenario we need a break below one important level mentioned in the daily research. This will provide a very good trading opportunity with prudent risk reward levels. Irrespective of the policy outcome prices did what it was supposed to do. The up trend that started post the Budget day looks to be ending with the RBI policy. Stay alert!

“The Financial Waves short term update” is the daily research report that provides indepth analysis on Nifty, Bank Nifty and stocks on rotational basis using Advanced technical analysis and Elliott wave / Neo wave and Time cycles.  For subscription options visit Pricing Page

Interim Update

Bottom Line: Nifty has failed to show any positive momentum as yet post the policy announcement. This suggests that the entire up move post 6825 low on Budget day was only wave X which was in corrective fashion. Avoid leveraging on upside unless we see close above 7800 levels. Move below 7580 will provide strong negative confirmation. Trade accordingly!