Cashing the Crash – Bank of Baroda, Tata Motors using Elliott wave!

Tata Motors shown serious capitulation in less than 2 trading hours and so did Bank of Baroda. Even when Nifty has been in a range these stocks declined sharply providing brilliant trading opportunity.

You can read detailed analysis on Tata Motors cashing the crash!

As per Elliott wave there are many corrective patterns like Flat, Zigzag, Triangle, Double correction, Triple correction and Complex correction. Understanding the pattern is easy but it is more important to identify the same when pattern is under formation so that next trade can be taken with proper risk reward ratio.

What is Elliott wave Flat correction pattern? This pattern is divided in 3-3-5 which means first 2 legs which is a and b are corrective waves. In this, wave b should retrace more than 61.8% of wave a. Post the completion of wave b, we can expect wave c should start in opposite direction to that of wave b in form of 5 waves i.e impulsive in nature. Bank of Baroda 60 mins chart meets the exact criteria. The below research is taken from “The Financial Waves Short Term Update” which was published on 14^th February 2017

Bank of Baroda 60 mins chart:

(Part of research taken from today’s report i.e 14^th February 2016)

Wave analysis:

“There was strong selling among the PSU banks and despite of Nifty closing in the green territory these stocks were the major laggards in the last trading session. Bank of Baroda was the major loser and it was down by 10.56% exhibiting a free fall from the peak.

Post the lows of 110 levels at the early 2016 this stock is forming a complex correction within the blue upward slopping channel. Wave z of the same was forming a flat correction pattern which now looks to be complete at the recent highs of 190 levels and the next leg has started on downside. As per this scenario using bar technique would be advisable and stay bearish as far as the previous bars high is intact on closing basis.

As shown on 60 mins chart, yesterday there was a Gap down opening at the start of the day and then there was complete domination by the bears over this bank. The entire previous rise was taken out in faster time with a series of red candles. As per wave perspective the complex correction looks to be complete at the recent highs and now the downtrend has started so outlook will remain negative. ….

Elliott wave can help us to place ourselves in the right direction of market with proper risk management strategies. To know the in-depth research on Nifty and 3 stocks on daily basis subscribe to “The Financial Waves Short Term Update” Subscription options

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Is it right time to invest in PSU Banks like Bank of Baroda?

PSU Banks have been the darlings in the recent run up of Indian equity markets. 

The trend has been sharp and fast on upside during the run up to the election period. However, post 16^th May the movements have become subdued and prices have been consolidating. During this period many of the retail investors are planning to invest in stocks as the major event is now over.

Please understand that stock markets are forward looking and discounting the future. Investing now might not be a perfect time from few months horizon. One has to understand the risk associated with investments and there is never a 1 way road. Investments if not done prudently can also result into huge losses and ask someone who has invested money near the top of 2008

Many of the stocks have lost more than 50% of the value from the highs and the media is talking about recent run up. Majority of the Midcap and Smallcap stocks are still lying at the dirt value with only a few making new life time highs which is catching the attention.

Case in point: Even from investment perspective there has to be a systematic way and one should do it with stoplosses in place. Technical analysis and Elliott wave theory help us to understand the maturity of trend and if the next big leg has started on upside with crucial stop loss levels.

Bank of Baroda Weekly chart:

The above chart is of Bank of Baroda published in today’s morning research report. The following is a part of that research report.

Wave Analysis:

PSU Banks are the one which has performed well in the recent rally on upside. However, post election, sell off was witnessed from the higher levels which suggest pause in an uptrend. This sell off has brought many of the Banks at the pivot support levels. Now, break of this level will suggest more weakness going ahead. We have picked up Bank of Baroda.

Medium to Long Term Perspective: As shown in Weekly chart, Looking at the up move from 500 to 1000, there is a higher probability next leg on upside has started. As per Elliott wave perspective, primary wave (1) completed at 1050 by end of 2010. Since then, prices were correcting on downside in form of primary wave (2) in Complex corrective pattern (W-X-Y-X-Z). The sharp move above the downward moving channel is increasing the odd that primary wave (3) has started on upside. We will get more clarity for the same when prices move above 1050 levels. This is the view as per medium to long term perspective. On the other side, if it is indeed new leg on upside, then downside correction should not retrace more than 61.8% of entire up move from 500 to 1000, which is coming near 700levels.Break of this level will indicate that correction which started from 2011 is still ongoing. From short term trading perspective, it is important to ………….

So from Long term investment perspective 700 becomes a very crucial Stop level. However, at times it is important to observe the short term Elliott wave counts as well to get better entry points. In today’s morning research report we have mentioned also about the short term trend ofBank of Baroda.

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