Friday, June 3, 2016

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 29th 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.

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