Where is Nifty headed post the Indian notes and US votes? Nifty
has managed to recover massive 450 points from day’s low near 8000 mark.
Events result into short term random movement but eventually
original trend resumes. Today was all
about the patience game. It seems that it is not only India but the entire
world is craving for a change. Much awaited US Presidential Election outcome is
finally here and funny part is markets are at the level where they were
supposed to be irrespective of who is elected in US.
In morning we saw a
knee jerk reaction due to duel impact post Mr. Modi announced a sudden step of
withdrawing Rs. 500 and Rs. 1000 notes from midnight itself and uncertainty was
looming in US Presidential Election.
We believe that
market reacts on news or events that produce only temporary blips and
eventually the original trend resumes. Today is also a classic case of this and
we have already seen what happened post #BREXIT as well.
Now read below a
brief gist on Nifty produced from “The Financial Waves Trading update”
that covers Nifty intraday trading strategy as well:
“This is a very bold step towards curbing
down black money but will result into short term liquidity crunch. The impact
can be multifold on the Real Estate and other related sectors that has
transactions majorly in cash. This can adversely impact banks as they might
have to increase provisions for NPA for coming quarters in case they are
exposed to lower quality credit loans. Markets hate uncertainty and this is
surely one such time when no one knows how the economy will be impacted by
sudden curb of black money that had created a parallel economy over many years.
Over long run this is a brilliant measure that will help bring back money in
productive form and create stronger base but definitely over short term it can
create panic especially when the rally was driven majorly by liquidity.
To add fuel to this the uncertainty still
looms over US Presidential Election and it is unclear if Hillary Clinton is
going to make it. Global markets are already substantially negative as of now.”
Now coming back to
Nifty there was a sharp bounce back from the lows of 8400 but the combined
uncertainty is going to result into a sharp Gap down opening below the previous
low as well. From wave perspective it seems the up move was only wave b of z
and we are going to see down move in the form of wave c. Trading such sharp
fall can be a challenge as there is not going to be any risk reward. Also long
positions will be stuck due to the event driven fall and am sure no liquidity
to meet the margin calls will further add to the panic scenario.
Nifty 60 minutes
chart:
This is a classic
case that highlights the fact that one should only risk that much in markets
that one can afford to lose otherwise an event like this can make you out of
the game very soon. Prudent money management strategy is very crucial as the
risk or stoploss in such cases will not help.
The above chart
clearly shows that the event only resulted into a temporary move on downside on
both the cases and eventually prices will reach the level seen prior to the
event.
Elliott wave theory
and other technical studies help us to understand the maturity of trend and
provide objective way of analysis. Such sudden reversals should be incorporated
in trading strategy.
Below is the Nifty
trading strategy mentioned in today’s morning research report –The
Financial Waves trading update even before equity markets opened. Look
for yourself even without knowing the panic low the strategy has worked
brilliantly thereby giving nearly 350 points gain.
Strategy for the day: For today, avoid creating
short positions as risk reward will not be favorable. Long positions can be
created if Nifty manages to bounce back 100 points from the lows and sustains
for an hour with day's low as very strict stop and target of 8450. BANG ON!
Happened: Nifty
bounced back from the lows and recovered back to the highs of 8475 on intraday
basis. We cannot be more accurate than this and it simply shows the power of
objective methods rather than relying on news or events to take decisions.
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and trust me it is indeed a thrilling experience to see such strategies working
on intraday basis even on event day. Visit Pricing page, select your product
and we will set you up for your daily report before market opens.
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