Bank Nifty Path Ahead using ADX and Ichimoku Cloud

Banknifty has been moving precisely as per neo wave count. Checkout this example of how we applied ADX and Ichimoku cloud with Price Action to identify the wave counts and predict the price movement.

Following research is picked up from daily equity research report – The Financial Waves short term update

Bank Nifty Daily chart

Bank Nifty 60 mins chart

Wave analysis:

In the previous session, on the daily chart prices formed neutral candle. We can see that Index is consolidating in a range of 43500-44150. Any breakout of the range is needed to understand a bigger picture. ADX is trading at 21 suggesting lack of trending move and giving us hints of range bound action.

On the hourly chart, we have applied Ichimoku cloud. Wherein we can see that prices have just given a close above the cloud which is a positive sign. However, confirmation is still pending for which we need follow up action.  Along with this, MACD is showing positive crossover but further price action is required to confirm the same. Overall indicators are giving us hints of possible up move. Any move above 44150 can confirm completion of wave (b) on the downside and then the up move will be in form wave (c).

In short, Bank Nifty is trading in between a range of 43500-44150. A break above 44150 can lift the price higher towards 44500. Whereas any move below 43500 can drag price lower towards 43150.

3 Months of Mentorship on Timing the Market – Above chart simply shows how price action along with Time cycle and Neo wave can be combined. A Mentor can ensure that proper application of these methods is passed across so that it can form a powerful system to generate that parallel source of income. Be a part of Elite traders community we call as #TimeTraders.

Nifty: Understanding Average Directional Index (ADX) for trend ahead!!

Nifty continues to move in narrow range near the important channel resistance.

Prices showed trend from 6200 to 6562 in span of 5 days and since then it is in non-trending mode from last 7 days. In today’s trading session even till 1.30 p.m, it was intact in between the important levels. Even heavyweight stocks such as Reliance, ICICI Bank, DLF, Maruti, PSU Banks, etc. have arrived near the crucial zone. On the other side RBI will be revising its interest rate policy on 1^st April 2014 but we have seen over recent pasts, interest rate hike resulted in markets going up the same day. So markets might not always behave in logical way we perceive. Elliott wave patterns on other hand helps us to understand the structure and trend we can expect irrespective or event outcome!

During this kind of environment, it is necessary to combine other indicators with Elliott wave theory and basic technical analysis to get the clues for the next short term trend ahead. This time, we have used Average Directional Index to gauge the strength in the current up move.

Below is the part of research taken from The Financial Waves Short term update where use of Average Directional Index (ADX) is explained.

Nifty daily chart:

Wave Analysis:

What is ADX?

On daily chart, we are showing Average Directional indicator that measures the strength of the trend. It seems the +Direction index (blue) and negative Directional Index (red) both have reached extreme levels and are turning. +DI and –DI measures the strength of positive or negative true range. In simple terms it helps to understand if on an average basis market is closing more up than down. It also indicates extreme or overbought zone.  As both blue and red line has reversed from extreme level it is an indication of sideways action or the uptrend is in matured stage. This is a lagging indicator and so we do not use it very often unless crucial reading is seen like currently. Previously such extreme reading was seen in October 2012 when both blue and red lines reversed and index corrected around 250 points.

In short, there is no change in our outlook as of now which is sideways to topping. Even the stocks are not providing a clear direction. Break of crucial levels shown on chart will determine the trend over short term and intensity of the movement will indicate medium term outlook.

We have been applying various indicators and techniques in conjunction with Advanced Elliott wave theory to be with market direction. Do not miss the next wave as elections are not far away and high volatility is expected in the coming days. Subscribe to The Financial Waves Short term update which includes Nifty and 3 stocks where short term trading opportunity exists. For subscription options visit Pricing Page

Waves Captal: Nifty continues to be in "NO TRADING ZONE"

Following is picked from the equity daily research publication by Waves Capital (www.wavescapital.com). Write to helpdesk@wavescapital.com for more information about this report.

Bottom Line: Nifty continues sideways action. Average directional index pointing towards trending move to start soon!

  

Nifty daily chart:

ADX indicator

 Nifty Daily chart:

Waves Analysis:

Waves Capital: We mentioned in our previous update, “In short, we can continue sideways action in narrow range for a day or 2 more before eventually moving up. Break above 5280 will be strongly positive. Any move below 5190 will indicate sideways consolidation is extending further.”

Failure of prices to move above 5280 and break of 5190 indicates that the sideways action is continuing further. We have shown Average Directional index (ADX) on first chart. This indicator uses the technique of Average True Range that calculates the true range of current bar compared with the previous bar. ADX helps to determine if the market is trending or non-trending in either of the directions. We can see that this indicator has reached the lowest level which has been seen only 4 times since 2005 till date. The value of 11 was last seen in January 2012 when the big rally started and we can see the sharp increase in this indicator above 20 levels indicating a trending move. During current sideways action over weeks ADX has touched the level of 11 again on 20^th April 2012 and bounced back from there. This is suggesting that a trending move shall start very soon. Every time these low levels have reached before we can see a move of atleast 600 points on Nifty in one direction.

Please understand this indicator does not provide information about the direction of the move but it does give a clue if we shall start trending which looks overdue now!

The second chart of Nifty shows that we have been moving in a contracting fashion. Also the number of days has been minimum 3 for up legs and maximum 6 for down legs.

We have completed 1 day of this down leg and there is possibility of atleast 2 more days of sideways action possible. This down leg from 5280 can also take 6 days like previous moves. But since the channel has contracted so much we doubt this leg will last for 6 days. It can make a low of 5160, bounce back over next 1 day and again retest the low at 5160 making it 4 days for completion i.e. by Monday or Tuesday we can probably complete this down leg. It is however imperative for prices to sustain above 5150 – 5135 levels. A close below this level will increase the odds that the trending move can start in downward direction.

Trading in such range bound market is always tricky and when the contracting phase is in its later stages it gets more and more difficult. Avoiding trades until a clear trend emerges will save you both emotionally and financially. Unless a range of 5135 – 5280 is broken avoid looking at stocks for directional moves since most of the stocks will whipsaw around crucial levels every time Nifty changes direction. Nifty is currently in “NO TRADING ZONE” unless we close below 5135 or above 5280…

Option traders should avoid writing calls or puts at such low volatility levels and when we expect a directional move to happen soon after next few trading days!

The BIG consolidation phase continues!

Nifty Daily

Nifty 240 mins

Nifty 60 mins

Nifty has been consolidating in the triangle formation longer than we had expected. We thought that a breakout has happened below 5400 but just to be surprised as Nifty entered the consolidation zone again. This makes it imperative to analyse what other indicators and sub- indices are telling us.

In today’s report we are showing Daily, 240 mins and 60 mins chart of Nifty. Let us now analyse what other indicators are trying to tell us.

As seen on daily chart, we have plotted Bollinger Bands® along with price. The lower Bollinger Bands is acting as a good support during the down fall. Please note the lower Bollinger Bands was also falling along with prices but still providing the support. Everytime this level was touched prices consolidated. This confirms prices have been following 2 std deviation band very well. Lately we can see that even the Bollinger Bands has started moving sideways. Both the upper and lower channel of the band is moving sideways without any direction and the distance between the bands is reducing confirming that volatility has reduced largely on “daily basis”. We will now wait for this band to take a direction which will confirm the sideways action is complete. If prices break the upper channel and the upper line changes direction to upside it will confirm that the breakout has happened above and if prices move below the lower channel with lower channel turning down it will confirm downside breakout. Let us not pre-empt the breakout and wait for these bands to give a directional confirmation.

ADX – Average directional index as shown on lower part of daily chart shows current move is trending or consolidation. ADX has been constantly falling and moved below 15 which is an extreme reading. We now expect a strong directional move to begin soon and ADX to start rising again. This will second our analysis that the consolidation is over. For now, along with Bollinger Bands this indicator is still projecting a consolidation phase is on.

On 240 mins chart, we have adjusted the triangle trendline to take care of false breakout. RSI has reached the upper resistance level from where it has generally reversed. A decisive move of RSI above this 60 level will indicate positivity but we will not pre-empt unless that happens.

On 60 mins chart, we can see lot of gapping action. The colorful candles make it very visible. A gapping move up convinces traders that the trend has started up and vice-versa for downward moves. But to only get caught when prices reverses suddenly again after a day or 2 with a gap. We are not convinced to buy in into current gapping rally but would wait for our supporting indicators to provide confirmation of a breakout. MACD on 60 mins is also moving in triangle formation and should give a breakout confirmation whenever it happens.

In short, we have shown some 4 to 5 indicators and none confirms a breakout yet. Let us wait for these confirmations along with prices, unless someone wants to play the range bound strategy but it might be too late for that now.

We are closely monitoring the pulse of market and key levels for us lie at 5600 on upside and 5360 on downside. We are monitoring these levels along with supporting indicators for strong directional confirmation.