Interim Update

Bottom Line: Nifty has failed to show any positive momentum as yet post the policy announcement. This suggests that the entire up move post 6825 low on Budget day was only wave X which was in corrective fashion. Avoid leveraging on upside unless we see close above 7800 levels. Move below 7580 will provide strong negative confirmation. Trade accordingly!

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.

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