Thursday, July 7, 2016

Nifty: Power of multi-month Channel, extreme optimism in last 100 points!

June 2016 was an eventful month with lot of news around the Globe that resulted into very high volatility and sharp movements.

“BREXIT” was the main focus in second half of June which resulted into big Gap down opening in world Equity markets along with sharp appreciation in basket of currencies against Britain Sterling – GBP. The selling pressure was seen across developed economies but emerging markets still managed to outperform post 24th June 2016. Nifty created a Gap of around 250 points with intraday low of 7925. This level was protected post the event day……

Below is part of the research picked up from daily research report “The Financial Waves monthly update”

Figure 2: Nifty weekly chart

Sharp appreciation was seen in INR against GBP and Rupee appreciated by nearly 8% in single day. Such sharp appreciation in currency pair is not a good sign as it directly erodes the bottom line of companies having exposure to the UK. Even so we are seeing some irrational exuberance where the world markets are ignoring its repercussions and are again back to the level or infact higher than that was seen pre- Brexit.

Nifty showed “V” shaped recovery from the lows without any meaningful accumulation or pattern formation. Such movements are not conducive from trading perspective atleast in index as it does not provide prudent Risk reward ratio. During such scenario one should focus on outperforming stocks that had managed to move higher irrespective of the news or events.

Weekly chart of Nifty shown in Figure 2, was previously update in January 2016 report when prices were near the lower support trendline of the channel. It was then we mentioned about the reversal is due from the lows which happened in late February after turning majority bearish. The scenario is stark opposite now when prices have reached towards the upper resistance line of this channel and majority has turning extremely optimistic for target of 9000 back on Nifty. Crowd turns extremely bullish exactly when prices hit crucial resistance and Fibonacci levels.

As shown on daily chart in Figure 3, (shown in actual research report) we continue to think that the rise from the bottom has been in double corrective pattern with current wave ……… of second correction is ongoing. The internal counts of this wave ……. is not clear and there is possibility we might start seeing some distribution from here on. In addition to the above channeling technique the area of ……… is also near the 76.4% retracement level of the entire fall from 8845 levels to …… which can act as reversal zone.

However, it will be only on faster retracement of last rising segment we will get strong negative confirmation. Unfortunately that level is now at 7925 which is far away from here. Break below ……….might result into break of d-f trendline which will provide first negative confirmation. So one should keep an eye on ………. followed by ……… levels for medium term reversal.

In a nutshell, the current ongoing leg …………..

The above research simply highlights use of channeling technique and imagine the power when combined with Fibonacci retracements, Time cycles and other advanced Elliott wave concepts – Neo wave. To get in-depth research covering these techniques on Nifty, Midcap index, Currency pair, FTSE 100, US Markets and much more subscribe to “The Financial Waves Monthly update”. For subscription options visit Pricing Page

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