Budget Expectations – Will Nifty manage to protect the multi-month channel support?

Indian equity markets topped out in month of March 2015 and crossed below the level of 7000 which no one thought is possible. A strong trend does not look at fundamentals like lower Crude prices or positive macro economic factors. It is only when the trend is due to change it will reverse. External events can only result into short term movement but eventually the major trend resumes.

Now look at the below chart of Nifty which shows prices have continued to move in downward sloping channel irrespective of the events, results or any other factors. This is one of the most basic methods of technical analysis that provides insight into the trend of the market along with crucial support or resistance.

Nifty daily chart:

The above chart shows the trend ongoing since March 2015.

Budgetary Expectations: Now many would be expecting a strong positive budget for reviving the stressed economy. Anything below expectation can result into serious capitulation. However, we believe that it will be perception towards the Budget outcome that will result into the movement. A good Budget will be perceived negatively if the sentiments are strong bearish and will result into break of previous low near 6870 levels. This level is going to be very crucial given the fact that it is very close to the lower trendline channel support.

On the other hand, a move back above crucial resistance level will result into a much needed relief rally. News will adopt and change based on the movement of markets and not the other way around. A positive move on Nifty back above 7255 will result into the focus on positive Budgetary outcome whereas break of 6870 will result into a strong negative news and how Budget fell short of expectations.

In a nutshell, it will be the movement of market that will define the news and Budgetary expectations. It is rare to see break below the downward sloping trendline on downside.

Let us see if the Budget is simply coinciding with the reversal due from the lower trendline support or the sentiments continue to be strongly bearish taking Nifty below 6870 which will be a real warning sign for medium to long term trend!

“The Financial Waves short term update” is a daily research report that shows Elliott wave counts along with other advanced technical concepts on Nifty and covers three different stocks. For subscription options visit Pricing Page.

Budget impact on Indian equity markets!

Budget is about to start and many would be eyeing on the news to determine the trend of the market. 

However, we believe that event can result into short term volatility and random movements rather than driving the trend. The trend whether up or down will eventually resume irrespective of the news outcome. People will then try to fit in the logic to justify the movement of the market based on theBudget outcome! A sharp reaction on Thursday on downside after the Railway Budget resulted into news that the Budget did not show any bold steps and so equity markets reacted lower. But on Friday Nifty was up by more than 150 points thereby erasing the loss of Railway Budget day and entering into the positive side. The news following it will be Economic survey painted rosy picture for future.

Today, if equity markets move lower even after strong Budget following is the news you will read in morning papers: “Budget expectations were already discounted in the rally and expectations were high for bolder steps”. On the other hand a positive close on markets will result into modification of news as “Budget lives upto the expectations with clear roadmap ahead!”. We have no intention to discredit this but please understand the news outcome will change based on market movements rather than markets moving based on the news. So the leading factor here is the equity market!

Now how do we look at the simple methods that help to understand the clear direction and levels for Nifty?

Below is the chart of Nifty showing only channels. Elliott wave counts are removed from here but showed in actual morning research report.

Nifty daily chart:

The below research is picked up from today’s morning “The Financial Waves short term update”that has shown clear path for Nifty ahead of Budget and the crucial levels. Subscribe now to look at this important path.

Budget day is finally here with huge expectations from across the industry and everyone is keeping an eye if Modi government can come out with a Big bang! Anything short of expectations can result into serious capitulation and so one needs to trade cautiously especially after the rise of yesterday. On most of the occasions Budget has acted as a reversal day and closing becomes very crucial. Also we can expect a movement in the range of 2.5% to 4% between highs to lows. This gives a room of around 220 to 350 points movement on Nifty on intraday basis between highs and lows. Also many times the trend is seen about 30 mins to an hour after the Budget is over. Based on this and looking at the pattern on Nifty we have shown the path that prices can probably follow.

Nifty has been moving in period of contraction over past few weeks. With the start of event this contraction can now change to expansion and can follow a path as shown above (shown in today’s morning actual report). The sharp reversal on upside has opened up the possibility that the entire pattern is forming as a Flat corrective with wave (c) forming a wedge shaped Ending Diagonal pattern. This is one of the probable scenarios. Also as the event can produce a movement of nearly 220 to 350 points on intraday this can be a possibility.

 In short, trade cautiously on the Budget day amidst the high expectations. Important levels for a clear trend to emerge will be either above 9040 or below 8600. As long as these levels are intact we can expect oscillation between ………. and ……….. levels as per the path shown (in actual report)!

Subscribe now this daily research report and get insights into crucial levels that can provide good trading opportunity today during BUDGET! For subscription option visit the Pricing Page on www.wavesstrategy.com and select “The Financial Waves short term update” and we will deliver the report immediately.

Attend the two days training session on Mastering Elliott – Neo wave along with Time cyclesshown on more than 100 charts on 14^th and 15^th March in Mumbai. For more details write to us at helpdesk@wavesstrategy.com or call on +91 22 28831358 / +91 9920422202

Nifty Elliott wave, Bollinger Bands®, MACD Trading Strategy before Budget!

Bottom Line: Nifty failed to close above 8900 or below 8800 and continued to move in a range. Break of either levels awaited for clear trend to emerge!

The below research was published today morning before equity markets opened in "The Financial Waves short term update" by Waves Strategy Advisors

Nifty daily chart:

Nifty 60 mins chart:

Elliott Wave Analysis:

Nifty had a range bound movement in previous week with prices touching the high of 8913 and low of 8793. There is a weekly Doji bar formation and a break of the range is important for clear direction ahead. Within this range IT stocks showed some outperformance and Bank Nifty failed to show any strong bounce back. Nifty has retraced around 80% of the previous down move whereas on other hand Bank Nifty which was leading the rally retraced only 50% of the entire down move. Also the bounce back in Bank Nifty is in overlapping formation so far which is not a good sign from medium term perspective. From weekly perspective, decisive break above 8913 will resume the positive trend whereas close below 8790 can result into short term downside reversal.

The recent up move which started in form of wave (c) of e from 8600 levels has so far taken 6 trading days. So a faster move back below 8600 in less than 6 days will indicate medium term reversal to downside. This will break the pivot level in lesser amount of time the up move took to form. Short term moving average of 20 days is also acting as an important proxy for trend. The support as per this average is also near 8600 levels.  

The movement of past few days has been exactly within the Bollinger Bands as shown on hourly chart. Prices have been moving sharply within the range but only to take support near the lower and upper areas of the Bollinger Bands. When on Thursday there was a strong move towards 8913 we expected a break on upside. However, prices reversed the very next day back towards 8800 support area. So now it is prudent to wait for an hourly close above 8913 or below 8790 for confirmation of the break of the band and start of the trend in that direction.

Range bound action has kept both Flat pattern and Triangle pattern possibility open. As mentioned above a faster reversal below 8600 will confirm truncation of wave (c) of e at the highs whereas on other side slower movement from here will indicate wave (d) of e is forming within a triangle pattern.

In short, Nifty is currently moving in a range but a clear trend should emerge on break of mentioned levels in this week. Leading sectors have failed to show any upside momentum which is a cautious sign and close below 8790 will result into short term downside reversal. Volatility can be high in current week ahead of Budget!

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Nifty and Budget! What is next?

The below research is picked up from the morning report "The Financial Waves short term update" for more details visit http://www.wavesstrategy.com/index.php/store.html 

Bottom Line: Nifty indeed kept the traders on pressure cooker till closing. Finally even the best of the Budgets failed to produce desired impact on index!

Nifty daily chart:

Announcements:

“The Financial Waves Monthly Update” is now published. The current research focuses on Sensex from medium to long term perspective and why we think that major rally to start before mid of next year 2015. We have analyzed how Sensex has reacted 1 week prior and 1 week post Budget.The amazing relationship between Nasdaq100 and CNX IT. Price action of Dow Jones , Sensex and Crude during War and Crisis. Steel Authority of India Limited (SAIL) exhibits good opportunity from investment perspective and long term path. USDINR analysis based on Elliott wave theory, Fibonacci retracement and RSI.

Subscribe monthly research report “The Financial Waves Monthly update” by visiting http://wavesstrategy.com/index.php/store.html and see yourself the long term forecasts and world markets at a glance.

       

Nifty 60 mins chart:  

 Wave Analysis:

In previous update we mentioned that “Today is the Budget day and volatility will be high. Closing will be crucial and looking at the overall pattern and counts we are expecting a downside move today of anywhere near 3% looks possible! In short, the trend continues to be negative and if we are looking at the pattern correctly the selloff will intensify from here. Use 7720 as crucial stop level for short positions and preferably on closing basis due to event.”

The movement of Indian equity markets indeed kept all the traders on pressure cooker whether on long or short side until closing. Nifty traded in narrow range till 11.30 and market reacted negatively during 1^st part of the Budget. It was later after the announcement of Direct and Indirect taxes and road map shown to cut down Fiscal deficit that Nifty showed a strong move from the lows of 7480 to the high of 7730. The twist in the trend happened exactly at crucial levels near 7500 on downside and near 7720 levels on upside. Bank Nifty as expected was most sensitive to the budgetary speech but closed negative by more than half a percent. The only sector that sustained with strong gains was real estate stocks after the REITs announcement. In totality, it seems the event produced strong spikes on intraday basis but Nifty finally resumed its short term downtrend. Also as expected the difference between high and low has been nearly 3.30% which we very clearly mentioned in our detailed update on Budget in current Monthly research report published on 3^rd July. 

A close observation shows that yesterday’s movement was very similar to that of the Budget day movement of 16^th March 2012 where the top was formed 2 days back and there was a strong spike on upside but Nifty finally closed in red. On next day the selling pressure continued. If we are linking the current pattern correctly to that of Budget day movement in March 2012 then the downtrend should continue today as well.

As shown on daily chart, Nifty formed an outside bar which does not change the short term trend and keep it negative as long as close above the previous day’s high is not seen. Volatility can continue even today and we expect 7500 to eventually fail to provide any support. Trading intraday on events like this can be both financially and mentally exhausting if caught on the wrong side of the trend exactly at the wrong time. We therefore prefer using closing levels on events day.

It seems that an important top is in place at 7800 level and this level should remain intact atleast till 25^th July or end of the month. Prices are now moving down in the form of a-b-c correction and wave b got completed near yesterday’s high at 7730. As long as the short term red channel shown on 60 mins chart is intact the trend will continue on downside. The probable target once 7500 breaks is towards 7250 levels. 

Infosys result due today will result into further volatility during the day. The stock showed down move and made a low exactly on channel support near 3250. Break below this level can result into sharp move towards 3050 whereas any move back above high of 3380 will keep the positive outlook intact. The negative bar created yesterday has raised some doubts on the internal strength of this stock and on the validity of Head & Shoulder pattern. Nevertheless, break of 3380 will be strongly positive. But for now it is better to wait for either of the levels to break for clarity!

In short, the roller coaster ride of yesterday produced intraday swings of nearly 545 points - enough to raise pressure of even the most conservative trader!!! For Nifty, there is no change in our outlook that the trend remains negative and existing shorts can now use 7700 level as stoploss. Break of 7500 will be crucial and selling pressure will intensify taking index towards 7250 support zone! If our wedge assumption is correct we should see intensity in selling pressure after some consolidation.Also if a strong positive Budget cannot drive the uptrend I am not sure what will result into upside reversal now! 

Attend the 2 days training workshop that will apply not only Elliott wave but other important techniques and Time cycles to capture the major turning points. Timing the turns is equally important along with Price projections and we will be discussing the current scenario and future path right from short term to long term forecasts till 2020 on Sensex, Gold, USDINR and much more!

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Budget Impact on stock markets! Why is Nifty falling?

The analysis will start on what was expected in Budget and what was delivered.

A strong negative close today will result into following news:

“BUDGET fall short of expectations with no concrete plan to reduce Fiscal deficit even when aggressive targets are given”

If equity markets manage to close positive and recovers from the lows following can be probable news we will hear or read:

“BUDGET addresses all the important aspects to revive the economy. A very balanced approach is shown by the new government within its 45 days of Budget. Markets are also optimistic about the efficient execution of the proposed plans”

The news will be focusing on negativity if Nifty closes in red whereas it will focus on positive aspects of the event if Nifty closes in green. Case in point: is news will change based on the outcome of the markets which is leading. We believe that events can result into spikes but that lasts only for few mins or few hours or few weeks and eventually the trend resumes.

Taking trading decisions based on news can be disastrous as news can change to fit the market movement. Even a very well drafted Budget will be perceived negative if there is across boardselloff and viceversa. We use Advanced technical analysis concepts like Elliott wave, Time cycles, Channels, Fibonacci ratios. The below chart was shown on 23^rd June 2014

Nifty daily chart: expected since 23^rd June 2014

Happened as of today: 1 pm

Nifty made a top at 7808 and reversed from there. Index witnessed a fall of more than 220 points from there making a low of 7479. We do not rule out short term spiky movement during the Budget but a trend should emerge probably by tomorrow after the event news is digested.

On downside 7500 will continue to be an important level to watch. But will Nifty manage to protect it? To know what can be trend from here and how we expect the month of July to span out subscribe to “The Financial Waves short term update”.

Attend the 2 days training session to be held on 12^th and 13^th July 2014 in Mumbai on Applying Elliott wave Time and Price concept and how to derive trades. For more information contact us at helpdesk@wavesstrategy.com or call us: +91 22 28831358 / +91 9920422202. For more details visit http://www.wavesstrategy.com 

Budget and Sensex! What are you expecting?

The below research is published in "The Financial Waves Monthly update" By Waves Strategy Advisors. For subscription options visit www.wavesstrategy.com 

Indian markets are riding high on expectation of Budget this time, which is believed to reduce to focus on reducing fiscal deficit, boosting growth and economic revival.

This time there are high expectations set on Budget day but it can act as short term ….. until July end and ………. major correction kicks in till April 2015 which will be a multiyear low and the unprecedented rise will continue towards 61000 mentioned in last year report!!!

Below chart shows movement on Sensex on the Budget day since 2000. We have marked numbers on the chart indicating the budget day and same has been explained in the table. Through this research we tried to find out the trend before and after the budget and percentage movement on the same day.

Sensex chart:

S. No.	DATE	RULING PARTY	BUDGET DAY HIGH-LOW MOVEMENT (%)	TREND ONE WEEK BEFORE BUDGET	TREND ONE WEEK AFTER BUDGET
1	01/06/1998		-4.78	Negative	Negative
2	27/02/1999	NDA	5.75	Negative	Positive
3	29/02/2000		-8.8	Negative	Negative
4	28/02/2001		5	Negative	Negative
5	28/02/2002		-5.19	Positive	Negative
6	28/02/2003		-1.41	Positive	Negative
7	03/02/2004 (IB)	NDA	-2.88	Negative	Positive
8	08/07/2004	CONGRESS	-3.90	Positive	Positive
9	28/02/2005		2.6	Positive	Positive
10	28/02/2006		2.10	Positive	Positive
11	28/02/2007		-3.7	Negative	Negative
12	29/02/2008		-2.9	Positive	Negative
13	16/02/2009 (IB)	CONGRESS	-3.70	Positive	Negative
14	06/07/2009	CONGRESS	-7.53	Positive	Negative
15	20/02/2010		1.45	Positive	Positive
16	28/02/2011		3.25	Negative	Positive
17	16/03/2012		-2.5	Positive to Sideways	Negative
18	28/02/2013		-2.70	Negative	Positive
19	17/02/2014 (IB)	CONGRESS	0.75	Positive	Positive

Here we have shown movement on Sensex on the Budget day since 2000. We have marked numbers on the chart indicating the budget day and same has been explained in the table. Through this research we tried to find out the trend before and after the budget and percentage movement on the same day. These are the following observation:

1)            As seen on the table in 2000 Sensex was negative by more than 8.5% which is the lowest and on the flip side positive by 5.75% in 1999 which is the highest since 1998.

2)            The average movement on Sensex from 2000 is 3.70% therefore in upcoming Budget on 10th July 2014 we can see a movement of anywhere between 2.5% to 4% between highs and lows.

3)            Whenever the new government is formed in five years we have witnessed that the budget day has been very volatile and 4% to 7% movement has been seen and out of 6 observations post Election the Budget day has been negative on 4 occasions and with only minor positive close of 0.75% in recent IB.

4)            Eleven times trend has reversed after the budget for atleast a week. Out of these eleven times: from negative to positive – four times and from positive to negative – seven times. Hence there is higher probability that this time market might correct on downside for a week atleast.

5)            Sensex has closed negative 12 times on budget day and on the positive side only 7 times.

In the end we can conclude that budget day would be very volatile with movement anywhere between 2.5% to 4%. The probability as per above statistics is favoring more towards negative close on B- Day than positive. Traders should follow strict risk management strategies accordingly.

In addition to above research we have also published a detailed analysis on 

- Relationship of Nasdaq100 and CNX IT

- Price action of Dow Jones, Sensex and Crude during the War & Crisis

- SAIL Long Term Outlook

- USDINR price forecasts

To get access to the complete research subscribe to “The Financial Waves Monthly update” along with short term research report for better timing the entries and exit and knowing the trend right from short, medium to long term forecasts till 2020! Visit http://www.wavesstrategy.com/index.php/store.html