Nifty at new highs, Is it time to be cautious?

Many are looking at Nifty touching new life time highs but majority of stocks from the Midcap and Smallcap space are still struggling near the lows. So is it time to look for buying opportunity? I have my doubts…

In order to understand the maturity of trend one first needs to identify the pattern under formation. This is most important if you are using Elliott wave or Neo wave for trade setup.

Now look below chart of Nifty which shows a Diamond shaped Diametric pattern. So what do you expect post its completion?

Nifty daily chart:

The below is published in the morning research report – “The Financial Waves short term update”

Elliott wave analysis:

In previous update we mentioned that following “Nifty and broader markets are behaving as expected. The overall tone will remain positive but at the same time using strict stop of 11020 is must on Nifty which is the Gap area”

Nifty after a positive start traded in the range of 11157 and 11113 levels. The overall movement was simply sideways even when prices managed to break above the earlier bar high. This shows that the required momentum is not building up. In the current market we are seeing sharp rise of more than 6% to 10% in stocks that are posting better than expected results whereas the ones which are missing the estimates are being corrected sharply to the extent of more than 10%. This is exactly the reason why one has to be extremely careful while trading in futures on stocks. Also such behavior is not necessarily on the high beta stocks from midcap or smallcap space. We are seeing such move in largecap stocks as well. So it is time to leverage less and let the market complete its irrational swings.

As shown on hourly chart,….(shown in actual research report)

Time cycles are already in sell mode and a very strong positive trend will not emerge for next 2 weeks if this cycle is working well. We are therefore getting more and more cautious with each passing day. Anyone who is only tracking index is looking at it as new highs but the stocks are telling a different story. The sharp rise is only relieving the oversold state in majority of stocks and this nowhere indicates start of fresh leg on upside in them. It is best to avoid the expensive stocks as the correction in them is still pending.

In short, Nifty can continue to drift higher with slower momentum as we are approaching towards the earlier peak of 11170 levels. As mentioned in earlier update there are series of resistance placed near …….. levels. On downside break back below ……… will be ….. Keep a watch on mentioned levels and form the trading strategy by buying near supports and selling near resistance!

The above clearly gives the important levels using which one can initiate trades. So what is next for Nifty from here? To know in detail subscribe to “The Financial waves short term update” daily research report and see yourself where do we expect next big trend to emerge. Get access NOW