Nifty: Application of Neo wave, Channels, AD Line, Moving averages!

Understanding the trend of Nifty with application of basic and advanced technical analysis concept along with Market breadth indicators.

Nifty has made life time high at 9532 level in the current week and post the same there is some sideways to negative action happening in today’s session. We believe that price is the supreme indicator and thus advanced concepts like Elliott wave, Neo wave helps us to understand the trend. Apart from this it is also important to looks at market breadth indicators such A/D line – Advance/Decline line. Breadth indicator is nothing but it gauges the percentage of stocks which is uptrend as against to stocks which are in downtrend. Declining AD Line is always a concern as it suggests number of stocks in decline is higher as compared to advancing stocks. Below we have shown part of research taken from “The Financial Waves Short Term Update” which was published in today’s morning.

Nifty daily chart:

Wave analysis:

(Part of research taken from today’s morning research report – “The Financial Waves Short Term Update”)

“In the previous update we mentioned that, “Nifty trend remains positive as long as 9370 is intact on downside. 9530-9550 is the next resistance zone to watch on upside.”

Understanding sector participation: In the last trading session Nifty consolidated till 1 p.m and post the same prices rallied towards 9530 levels. On net basis there was not much change and prices closed on a positive note with 13 points gain. During the same time, stock specific action has continued in which Tata Steel gained 8%, IB Housing Finance (3%), Tata Motors (2.60%), ICICI Bank (2.25%) respectively. During the uptrend we often witness rotational rally and hence it is better to trade stock specific in the direction of the trend as long as Nifty is sustaining above important support levels. Sector wise outperformance in Metal and Auto was witnessed which closed in the positive territory.

The daily chart of Nifty shows that prices have been intact in blue upward moving channel which is connecting the important lows of 7893 and 9075 level. Few days back Nifty tested this channel support and resumed the uptrend. Hence as long as this channel is protected, it is better not to catch the top. As per wave perspective, prices are in wave …. of Diametric pattern which is subdividing further. Forecasting of wave g is little tricky as it has broken above the black channel resistance and hence as long as pivot lows ……

We have shown Advance/Decline line which was shown few days back as well in this research report. We are again showing this as Nifty is trading at life time highs and the overall breadth has continued to deteriorate. In fact, this AD line is now on verge of crossing below the levels seen in beginning of 2017. This indicates negative divergence between the market and its internal health. Hence one should trade with strict risk management strategy.

(60 mins chart with Elliott/ Neo wave is not shown here which is covered in research report)

As shown in 60 mins chart, prices are trading close to the upward moving channel resistance. The major drawback of this channel is that as and when sideways action happen, it creates further room on upside. Hence it is better to keep an eye on important areas. ….. is the immediate support where black channel support is also placed.

In short, Nifty trend is positive but it is near to the channel resistance so expect some consolidation. …. is the important immediate support for now and avoid catching a top unless ……

The volatility is going to increase in next few days and in this volatility one should not get carried away and following the important reversal area along with pattern is vital. Subscribe to “The Financial Waves Short Term Update” which covers Nifty and 3 stocks on daily basis.