Tuesday, June 7, 2016

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.

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