Tuesday, November 22, 2016

Nifty flirting around 8000 levels! Applying parallel trendline concept and Elliott wave!

Below research is picked up from "The Financial Waves short term update" by Waves Strategy Advisors - www.wavesstrategy.com To subscribe to daily research report visit the website.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In the previous update we mentioned that, “In short, Nifty continues to drift lower in last session. It is only on move above 8150 followed by 8210 will suggest positivity however any break of 8030-8000 zone will lead to panic selling”

Nifty opened near 8100 levels but only to enter into red territory immediately. Selling pressure continued to build up throughout the day and majority of stocks along with high beta Midcap and Smallcap sectors ended in deep red territory. It is prudent to avoid catching a low in such market unless and until we see decisive close above the previous day high.

Nifty has now broken the psychological level of 8000 as well. This time the fall has happened after breaking the downward sloping channel on downside which was also on back of the event on 9th November. On the same day there was sharp positive retracement and Nifty touched 8600 the next day on 10th. Post that the strong selling pressure started building up. Such high volatile swings result into tricky trading environment which we are witnessing now, especially when the global markets are stable and US markets have been touching new life time highs. It is not very often to see such wide divergence between Indian equities compared to global markets. Nevertheless, during such scenarios one needs to wait for close above previous day’s high for some indication that there is a pause or atleast temporary halt in the selling pressure. In the entire down leg from 8600 there is not a single close above the previous day’s high.

We are showing parallel red channels on the daily chart which has provided support during the spike low of 8002 on 9th November. The problem is there is no major downward sloping channel and so we need to make use of parallel trendlines to identify the important support zone. 7925 was also the level created on the day of BREXIT event. Such spike lows are important and if Nifty continues to move below 7900 then the next parallel trendline support near 7600 will open up.

As shown on hourly chart, the fall from 8600 looks to be in double corrective pattern with wave a of second correction currently ongoing. During this entire trend 15 period Exponential Moving average has worked very well as resistance and we have not seen decisive hourly close above this average all the while. Also for any positivity we need to see break above the red trendline along with faster retracement above 8105. Unless that happens the short term trend will remain negative.

In short, trend for Nifty is negative as prices have closed below psychological level of 8000. Further negative close below 7900 will open up more downside possibilities. Immediate move above 8000 is required to hint towards atleast a pause in the downtrend with 8105 as important resistance on upside.

For daily update along with detailed Elliott wave counts on Nifty, Bank Nifty, Stocks, “The Financial Waves short term update” with short to medium term outlook and key reversal areas. For more details visit Pricing Page.

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