#BREXIT Impact on Indian Equities, Nifty Elliott wave pattern

#BREXIT Impact on Indian Equities, Nifty Elliott wave pattern. For subscription to daily research report "The Financial Waves short term update" that covers Nifty and stocks with applied Elliott wave, Neo wave and Time cycles visit www.wavesstrategy.com

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BREXIT or Alignment of indicators – TRIN, Neo wave, AD Line, Momentum

Indicators pointed towards the impending reversal in trend whether BREXIT or not!

Nifty Sharp fall: Predicting based on Neo wave Diametric pattern, AD Line and TRIN indicator irrespective of BREXIT decision!

Finally verdict is out suggesting that Britain will exit from European Union. Due to the same Global Equity Markets are capitulating in today’s session. 

Indian Equity Markets are no different than others which has lost more than 3.20% by 1:08 pm. Now majority will relate this sharp fall with BREXIT issue however what if we say that

 Markets were hinting towards serious decline before a month back based on Neo wave pattern, Advance decline ratio and TRIN indicator.  Below we have shown part of research taken 

from “The Financial Waves Monthly update” and “The Financial Waves Short Term Update”.

Nifty Neo wave plot (Anticipated on 6^th June 2016)

(Research taken from The Financial Waves Monthly Update published on 6^th June 2016)

Nifty Neo wave plot (Happened till now)

(Research taken from The Financial Waves Monthly Update published on 6^th June 2016)

Diametric pattern on lower degree: As shown on the Neo wave plot in Figure 3 – after forming wave x near the lows of 7516 on 11^th April 2016, currently wave e of the Diametric pattern is in formation. The initial legs of this pattern showed contraction and we should now see expansion in legs e,f and g. However, we have observed that wave g is normally a short affair both in terms of price and time and it will not necessarily mimic wave a. Currently, wave e is ongoing and post its  completion we should see few days of retracement of the current up leg in form of wave f. This wave f can travel towards the channel support area which is near  psychological 8000 mark before the final wave g on upside completes the entire rally that started from 6825 levels.

Happened: Nifty moved exactly as expected. The index was trading near 8250-8300 in the start of June 2016, we expected down move towards 8000 in form of wave f and then wave g on upside. Nifty did move towards 8060 level by 14^th June 2016 and then wave g towards 8285 level by 23^rd June 2016 which indeed was a short affair both in terms of price and time.

Now look at the below indicators which were shown over past few weeks in our daily research report “The Financial Waves short term update” that warned about weakness in rally!

Advance Decline line (AD line)

(Part of research published in the Monthly report dated 6^th June 2016)

Advance Decline line measures the cumulative number of advancing stocks to that of the declining stocks. We can clearly see from the chart above that this AD line is still near the lows of February when Nifty has continued to move higher. It shows on an average basis there has been more number of declining stocks than that of advancing even during the rising market and so this indicator kept on drifting lower. Wave characteristics provide higher conviction to existing counts.  The above wave characteristics conform to the current outlook that the broader market is failing to participate in the up move which is typical during the final legs of corrective pattern.

In a nutshell, the ongoing wave B can consume two more weeks to complete before we can start seeing strong move on downside. On one lower degree post completion of wave e, wave f should correct part of the recent run up. Also the overall breadth indicators are in sync with our existing wave counts suggesting that this is NOT the start of new bull trend but only a part of ongoing bigger degree correction that started at 9119 in 2014!

Happened: Here we have clearly mentioned that the rally started from 6825 level is not the fresh bull trend on upside as the rally was corrective in nature and Market breadth was deteriorating.

NSE TRIN Indicator: (Published in the morning of 22^nd June 2016 taken from The Financial Waves Short Term Update)

(Part of research taken from the report dated 22^nd June 2016)

TRIN Indicator: During the crucial juncture we have often covered TRIN indicator to know the overbought or oversold level. 

The zone of 1.2-1.3 suggests oversold state of market whereas zone of 0.6-0.5 indicates overbought state.As of now TRIN is at 0.5 level which was not witnessed earlier in last 2 years. This indicates that most of Volumes have already gone into buying and it is time to stay alert now. Nevertheless, it is the time not to be complacent in current market environment. TRIN indicator has inverse correlation with that of prices and such extreme readings are not very often.

Before BREXIT: (Below is part of research taken from “The Financial Waves Short Term Update”dated 23^rd June 2016)

Bank Nifty has been underperforming over past few days and even the outperforming stocks like Yes Bank, SBI has lost its momentum and exhibiting distribution behavior. Along with this as mentioned earlier even though Nifty managed to move higher, Bank Nifty has still failed to take out the highs of 15th June. Moreover yesterday’s breadth was near 978 advancing to 1591 declines on BSE even though index was down by mere 0.20%. The number of stocks hitting new 52 week’s high is also on decrease indicating that there is loss of momentum over past few days. The AD line is on the verge of breaking the lows when of 29th February 2016 when Nifty was at 6825. These are NOT very promising signs and above that the expectations of seeing Nifty back towards 9000 is on a rise post the BREXIT event.

In short, majority of the indicators are again getting aligned when the breadth in the underlying market is deteriorating and everyone is busy focusing on the outcome of BREXIT event to create long positions. TRIN indicator, AD line, Channels, Number of new highs, Elliott wave pattern, sectoral divergences are hinting towards shift in sentiments and market dynamics. Price confirmation is going to be important which will be below 8100. Move above 8265 will extend short term up move but that will be the final breath for the market before medium term reversal.

Do not wait for any news or events and understand the Market behavior applying objective technical tools. Subscribe to “The Financial Waves Monthly Update” which is published in the first week of every month and “The Financial Waves Short Term Update” which covers Nifty, Bank Nifty and three stocks with in-depth research. For subscription visit Pricing Page

Attend the most Advanced Training on Technical analysis which will cover above indicators and methods that helped us to warn our subscribers well before the event occured.

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BREXIT Impact on Indian Market

In the previous updates itself we mentioned that whether BREXIT or not Indian markets are already looking weak with majority of indicators started aligning together for a reversal!

Avoid creating any long positions and any rallies can be utilized as selling opportunity. It is difficult to say the level from where we can see meaningful bounce back. Markets hate uncertainty and the current scenario reminds me of Lehman Brothers bankruptcy in 2008 when no one knew the impact on the Global markets and economy.

Currency war: Such sharp appreciation in INR against GBP and sharp fall in GBP against USD is an indication towards rush for finding the true value. Volatility in currency kills the margin along with demand. This will result into impacting the profitability of not only exporters but importers as well since they would have been well hedged. Demand is definitely going to go south as expansion in already bleak looking economy in UK will be on a halt until new policies are set which will take its own sweet time.

Possibility of other Exits: This does not look like an immediate possibility otherwise EURO will be dissolved creating stress and eventually war for survival instincts. But will definitely raise the possibility where if austerity measures are not met internal stress will increase on economies that are trying to take the burden of those who are lethargic.

More details about how our markets will move will be published in “The Financial Waves short term update” tomorrow and we have been prudent in mentioning over past few weeks to stay alert as internals were weakening whether BREXIT or not!!!

Nifty: BREXIT or not major technical indicators getting aligned together AGAIN for a strong trend!

BREXIT has been a major event that the world markets are eyeing upon to understand the underlying trend for future from here on. We believe that events will result into short term move but the major trend of the market eventually resumes. Freely traded markets follow specific set of patterns and rules that makes them predictable. Also market discounts the future and majority try to focus on events that will result into the market movement. There is a flaw in which majority thinks but Equity markets are constantly looking into the future…

We believe irrespective of the BREXIT outcome the underlying tone of the market has been already shifting and the trend that started from 29^th February 2016 is now approaching a major completion.

Below is a part of the research picked up from “The Financial Waves short term update” daily research report published before equity markets open. Various technical indicators are now again getting aligned together pointing towards an important top very near irrespective even if Britain stays back in EU.

Nifty 60 mins chart:

Wave analysis:

Below research is picked up from “The Financial Waves short term update” – daily research report covering Nifty, Bank Nifty, stocks on periodical basis and showing application of Elliott wave, Neo wave, Time cycles along with other indicators.

In previous update we mentioned that, “So stay alert in case Nifty fails to show positive move above 8265. Sideways market creates state of confusion with no clear directional move which we are currently seeing and it is prudent to wait for breakout!”

Nifty failed to move above 8265 even in yesterday’s session and reversed back from the crucial channel resistance. The entire formation looks like distribution and various indicators are getting aligned again.

Bank Nifty has been underperforming over past few days and even the outperforming stocks like Yes Bank, SBI has lost its momentum and exhibiting distribution behavior. Along with this as mentioned earlier even though Nifty managed to move higher, Bank Nifty has still failed to take out the highs of 15^th June. Moreover yesterday’s breadth was near 978 advancing to 1591 declines on BSE even though index was down by mere 0.20%. The number of stocks hitting new 52 week’s high is also on decrease indicating that there is loss of momentum over past few days. The AD line is on the verge of breaking the lows when of 29^th February 2016 when Nifty was at 6825. These are not very promising signs and above that the expectations of seeing Nifty back towards 9000 is on a rise post the BREXIT event.

Looking at the Global markets with recovery over past few days there is high possibility that Britain might not exit EU which can create a short term upward spike but that should be only a temporary affair.

Diametric pattern: detailed explanation of the ongoing pattern given in the research report.

In short, majority of the indicators are again getting aligned when the breadth in the underlying market is deteriorating and everyone is busy focusing on the outcome of BREXIT event to create long positions. TRIN indicator, AD line, Channels, Number of new highs, Elliott wave pattern, sectoral divergences are hinting towards shift in sentiments and market dynamics. Price confirmation is going to be important which will be below …….. Move above …….. will extend short term up move but that will be the final breath for the market before medium term reversal…….

It is not easy to have a stand opposite to the crowd but objective and scientific methods help us to take a stand which majority might be missing. We turned bullish when Nifty reversed from 6825 levels in early March 2016 and now is not the time to get carried away in the euphoria. We will turn strongly bearish once the key levels are broken but the indicators are already warning us to be ready before pulling the trigger!

You can now learn the above mentioned techniques by attending the two days training workshop on most advanced technical analysis training and how Hurst’s Time cycles can be used to forecasts Neo wave patterns. The training is scheduled on 23^rd and 24^th July 2016 in Mumbai. For more details and registration visit http://www.wavesstrategy.com/FreeArticles/AnnuDetails.aspx?Article=11462 or Contact US

Nifty managed to move higher ignoring RBI Governor - Mr. Rajan resignation!

RBI Governor - Mr. Raghuram Rajan had created a huge following during his tenor as RBI governor over past few years and has been known in the industry to be unpredictable but prudent and visionary to do what is best for the economy as a whole. On personal front he had managed to curb down volatility on Indian Rupee thereby making it a challenging environment for a trader  L but nevertheless it was much needed to help major importers and exporters who can mitigate forex risk. Overall even though monetary policy outcome had been more unpredictable during his tenure but we personally think he has done what is in best interest for the economy at large in future! Hope the next RBI governor lives upto his expectations….

Now let us see the impact of event or news on Equity markets. Below is the chart of Nifty that with highlights on the areas driven by events.

Many were expecting serious selloff if Mr. Rajan does not continue and now when the news is out Nifty just had a Gap down opening which did not even last for an hour and prices quickly recovered back and entered into green territory.

Nifty 60 minutes chart:

Above chart of Nifty reflects movement of market during the news flow of “BREXIT” and “Mr. Rajan’s resignation” as highlighted by points 1 and 2 respectively.

On 13^th June, Nifty had a Gap down opening after the Global selloff on fear of BREXIT i.e Britain exiting from European Union for which voting is going to be held on 23^rd June. However, prices made a low of 8060 and protected this low throughout last week thereby exhibiting inherent strength.

Later over the weekend after Mr. Rajan resignation many expected a serious selloff but again Nifty just had a Gap down which lasted only few minutes and prices are moving independent to the event.

Case in point: These events are important and there is no second thought about it but it is foolish to anticipate the direction of market move post the outcome of news. In fact a positive close on negative news shows inherent strength and this is what we use to determine the overall strength or weakness.

Channeling techniques: This is a basic technique in technical analysis but one of the most effective method that help a trader in making trading decision. Nifty has continued to move within this channel  

We use Elliott wave, Neo wave and Time cycles to understand the trend of market itself. These techniques have helped us stay objective amidst all the news and events.

Learn the important techniques like Elliott wave, Neo wave and Time cycles and how can all be combined together with basic technicals like Channels, Fibonacci retracement and projections, Bar techniques to derive ideal trade setups for entering, exiting a trade and using momentum technique for stock selection by subscribing to the daily research report “The Financial Waves short term update” that shows application of above methods on Nifty and stocks. Visit Pricing page for subscription options.

Attend one of the most advanced training on technical analysis – “Elliott wave, Neo wave and Hurst’s Time cycles- Stock selection with practical examples and Trade setups” scheduled on 23^rd - 4^th July 2016 in Mumbai. Registration is on first come first basis. Limited seats! For more details Contact US or visit http://www.wavesstrategy.com/FreeArticles/AnnuDetails.aspx?Article=11462

Hurst’s Time cycle to predict Neo wave Diametric pattern and Channels!

Nifty managed to protect the lows of 8060 in the previous session and continued to outperform the Global markets!

Nifty daily chart:

Nifty daily chart:

Wave analysis:

In previous update we mentioned that, “In short, it is now prudent to wait and see if the up move was only a temporary affair and prices start showing weakness again below 8060 or manages to generate momentum above 8265 for positivity to continue.”

Nifty gave away all the gains of earlier session and closed negative after just 1 day of temporary pullback. However, prices managed to protect the lows of 8060 which we mentioned as important to cross for downtrend to resume. Post touching 8074 levels there was recovery in second half with index finally settling near 8140. Such movement can be expected because after a sharp up move from 7715 levels we will not see sharp corrections. Many will try to enter now who missed the rally on upside which will result into frequent intermittent pullback. This is also typical to the behavior of wave (f) of Diametric pattern.

Hurst’s Time cycle: Let us again visit this Time cycle method that has helped us to forecast the pattern for many months now. As per Hurst’s Time cycle there are certain nominal cycles which work across markets on different time frames and the key is to identify the actual cycle in close proximity to the nominal cycle. We identified 54 days and 108 days cycle working well on the daily scale for Nifty. This cycle also helped us to capture a low near 6825 levels on 29^th February when the majority was focusing on the downside breakout. Along with that channel also provide important reversal areas.

54 days and 108 days Time cycle: The cycle low on 29^th February was of both 54 days and 108 days low. This is the reason the movement out of it was sharp and fast similar to that on the previous occasions. The next cycle low is again due in early August which will result into an important bottom formation. Normally cycle tops out in second half of the period. So a 54 days cycle will show some tiring behavior post 27 days. But the problem for catching a top is that a higher degree cycle can be in up-trend thereby resulting tops to be disbursed. But during low formation all the cycles get synchronized which results into sharp or panic low formation. Therefore cycle analysis is more useful for catching a low rather than tops that are disbursed. Nevertheless, we can still derive some indication towards maturity of trend by looking at the age of ongoing cycle.

For now to identify a good trending move, it will be post 27 days of 54 days low a strong downtrend should start kicking in. So far the 54 days cycle is only 17 days old and therefore the current trend is not strong on downside.

The pattern that fits into this Time cycle scenario is a Diametric pattern in second correction which we has been working very accurately so far. This is the reason why we are assuming the current leg as wave f of Diametric pattern that is currently ongoing and post its completion we should again see wave g on upside. Second Nifty daily chart shows the internal counts of the recent up move.

In short, it will be on break below 8060 we can expect a move towards the channel support which is near 7950 – 8000 whereas move above 8265 will indicate start of wave g on upside. Until then trade cautiously in this volatile but range bound market!

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ICICI Bank applying Channels, Time Cycles, Bollinger Bands® and RSI!!

Recently Bank Nifty failed to show momentum above 18000 level and reversed on downside sharply. During such volatile market one should be ready with the trading strategy on different stocks. ICICI Bank is one from the private banking space which has been underperforming from medium term perspective and finding strong resistance in the zone of 258-260 level. What should be the trading strategy applying different techniques like Channels, Time Cycles, Bollinger Bands, RSI and Elliott wave? Below we have shown part of research taken from “The Financial Waves Short Term Update”which was published in the today morning.

ICICI Bank daily chart:

(Part of research is taken from The Financial Waves short term update report)

Wave analysis:

Bank Nifty failed to sustain above 18000 level and has moved lower towards 17600 in last session losing 1.3%. In last session prices also had Gap down opening and post that it has sustained below the same. So over short term as long as Gap down area is unfilled short term trend will remain negative. During such kind of trading environment one should use selling strategy in stocks which has reversed from the crucial resistance zone and ICICI bank is one of them.

The above daily chart indicates that as compared to other private banks, this stock failed to show any deeper retracement on upside and still trading way below its 52 weeks highs. This suggests that this stock is underperforming. As per wave perspective, the rally from the low of 180 to 260 is corrective in nature which suggests that another wave…… of third standard correction is ongoing.

During the range bound market Bollinger Bands works well. Recently prices tested the upper band of as shown on daily chart and reversed on downside sharply. RSI has also reversed from 70 level which was previous resistance and hence downside correction from here may have started. Apart from that 68 days topping Time Cycle is also due which has formed important tops in past. Hence one should be cautious now.

To know the Elliott wave pattern on short term chart with important reversal areas, subscribe to “The Financial Waves Short Term Update”and for more information visit Pricing Page

Register NOW for one of the most Advanced Training on technical analysis – Neo wave applied along with Time cycles to understand the key reversal areas and pattern analysis for trading and investment decisions. We have been able to capture most of the important reversals including the recent top. When Nifty formed a low near 6825 on 29^th February and reversed back we published extremely bullish report the very next day using the above techniques and now when majority were expecting prices to continue the strong uptrend we were constantly mentioning weakness seen in the broader market as majority of stocks failed to participate even when Midcap and Smallcap indices were positive. Two days workshop will focus on various tools we use to identify and trade stocks that also helped in winning the stock trading contest on ET NOW stock game show by substantial margin. Visit Training on Neo wave now and avail Early Bird offer valid only for two more days. Also receive FREE Neo wave report for a month to learn practical application on actual charts as the pattern develops.

Mutual Funds - Past Performance by itself is not a predictor of future returns:

You can't open a newspaper or read a magazine without seeing ads promoting the stellar performance of "hot" mutual funds. But past performance is not as important as you may think, especially the short-term performance of relatively new or small funds. As with any investment, a fund's past performance is no guarantee of its future success. Here are some facts based on data for the last 10 years:

• Most of the Top 20 mutual funds in a given year did NOT make it to the top 20 in the next year. In 2008 not a single mutual fund did.

• The mutual fund that gave the best 10 year return never appeared in the top 20.

• The mutual fund that gave the worst 5 year return (and the 5th worst 10 year return) was the top performing mutual fund in one of those years.

• None of the mutual funds in the Top 20 ranking for 2001-02 made it to the top 20 more than thrice in the next 10 years.

• the fund's sales charges, fees, and expenses;

• the taxes you may have to pay when you receive a distribution;

• the age and size of the fund;

• the fund's risks and volatility; and

• Recent changes in the fund's operations.

·    Reliance Equity Fund was the top performer in the Large Cap category in 2012, with a return of 41%. Did you know it was the worst performer amongst Large Cap funds by historical return? i.e. if you were in Dec-11 and would have picked up this fund’s historical analysis, it was the worst performer by 1y, 2y, 3y, 4y and 5y return.

    Another best performer, SBI Bluechip Fund (2012 return: 38%), never beat more than 33% of its peers ranked by past 1y, 2y, 3y, 4y and 5y return as of Dec-11.

Because of the way our brains our wired, we often believe that a mutual fund that did well in the past should therefore do well in the future.But that's a mistake.

Look at more than a fund's past performance

Over the long-term, the success (or failure) of your investment in a fund also will depend on factors such as:

What makes us different?

As the business cycle keeps changing not necessarily past top performing funds will continue to be the top performer for years to come.

We therefore use Elliott wave model in order to determine the maturity of trend and the funds that has potential to outperform along with inter-market analysis. We use patterns to determine the future path and not just past returns. This helps us to select the funds that have potential to outperform going forward.

Invest NOW in our top recommended funds!

Sources: US Securities and Exchange Commission https://www.sec.gov/investor/pubs/mfperform.htm

Business Insider India            

                                            

http://www.businessinsider.in/The-Past-Performance-Of-A-Mutual-Fund-Is-Not-An-Indicator-Of-Future-Outcomes-96-Of-The-Time/articleshow/38330459.cms

RBI keeps key rates unchanged, Nifty continues to move in a range after first 3 strong days

Bottom Line: Nifty moved in a range of 8190 and 8230 before the RBI policy meet due today. Closing will be important for short term direction.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In previous update we mentioned that, “Nifty closed flat on last trading day of the week with underperformance coming from Midcap and Smallcap space. Momentum is failing to build up but we are yet to see price reversal for confirming start of wave f. During such scenario one should follow trailing stop for existing long positions”

Nifty had another lackluster day with prices trading within a range of 8230 and 8190 levels. Majority of the sectors continued to drift in sideways action and looks like movement will be witnessed post the policy announcement.

Majority of the economists are expecting RBI to maintain the status quo in today’ policy meet but everyone is eager to see if Mr. Rajan will continue his second term or not. For us markets reaction and closing levels are going to be important. A negative close on positive news will be bearish and will hint towards start of wave f on downside whereas close above the previous high of 8262 will continue the short term positive trend.

On a weak day we are easily seeing more number of declining than advancing stocks thereby putting pressure on the overall breadth. As mentioned earlier such readings are in sync with existing wave counts that prices are in wave e of Diametric Pattern and post its completion we should start seeing wave f on downside taking prices back towards the psychological level of 8000.

As shown on hourly chart, prices are now whipsawing around 20 period EMA which has acted as good proxy for short term positive trend. Sustainable move below this average will hint towards start of wave f but unless that happens one should avoid creating short positions. On downside 8130 is the near term support.

In short, market reaction post the policy meet is important. We have normally observed trending move starts approximately 30 mins after the policy announcement but closing level will be crucial. Important levels to observe today will be 8260 on upside and 8130 on downside.

“The Financial Waves short term update” is a daily research report that shows detailed support and resistance levels along with Elliott wave counts, Time cycle concepts and other technical indicators applied on Nifty, Bank Nifty, stocks providing good trade setups opportunity. For subscription visit the Pricing page.

Nifty Continued to move Higher but with lack of Momentum. Stay Alert!

Nifty managed to break above the previous high and closed near 8218 levels. This will keep the short term trend positive with 8110 as near term support.

Nifty daily chart:

Nifty 60 mins chart:

           

Wave analysis:

In previous update we mentioned that, “Nifty has continued to move in range. Sustainable move above 8215 level will indicate that trend is continuing.”

In the previous trading session Nifty consolidated till 2 p.m. in the range of 8180 and 8160 level. Post that, prices managed to close with a gain of 40 points near the highs of 2016. This will keep the short term trend positive unless we see a close below short term support.

As shown in the hourly chart, we have highlighted the process of distribution on prior occasions in wave a. As mentioned earlier, since the lows formed at 6825 on 29^th February 2016 the best of the trend is seen only during first 3 to 4 days of reversal and post that we can see non trending move. Even recently the bounce back from 7720 has been sharp and fast for the first 3 days and post that prices are simply drifting with slower momentum even though it is touching new 2016 highs. Nevertheless, unless we see break of the short term support and close below the 20 period Moving average the trend will remain positive. One should avoid catching a top in the current trend.

Participation has been reducing even when a few stocks are moving higher by 7% to 8% after the results. This can be clearly measured by looking at the AD line which is still near its 2016 lows. This clearly shows that the rally is not broad based which is in sync with our current corrective wave counts.

Prices continued to move in wave e of the Diametric pattern and break of 8110 will be first indication that wave f on downside has started. Unless that happens one should avoid catching a top here and follow trailing stop method for existing positions to make the most out of it.

In short, Nifty managed to close above previous high of 8210 but Bank Nifty is yet to break its pivot high level. This will keep short term trend positive but one should not be complacent and follow strict stop loss in case of sharp reversal.

Analyzing complex corrective pattern is not always easy and it requires combination of different techniques to be on the right side of the trend.

Subscribe NOW to the daily research report “The Financial Waves Trading Update” that covers detailed Elliott wave, Time cycles, Bollinger Bands and other techniques applied on Nifty. For subscription visit Pricing Page.

Attend one of the most advanced training on Elliott wave, Neo wave in combination with Time cycles and application of all the above techniques. Also training will focus on methods used during the trade show on ET Now that helped me to outperform other contestants and gain nearly 9.11% in just one week! For more details about the training visit: Most advanced technical training details