HINDALCO: Trading using Ratio Analysis!

The below research is by Waves Strategy Advisors. For daily research report subscription visit http://www.wavesstrategy.com/index.php/store.html

Indian markets continue to move with rotational rally concept.

In this kind of market, it is better to understand which sectors or stocks will underperform or outperform Nifty. Hindalco is one of the stocks from metal space which is underperforming the Nifty. In the mid December 2013, share prices were trading at 126 levels and currently moving at 98, almost 20% down from the highs of December 2013.

Below is the part of research taken from“The Financial Waves STU” which was published in the morning of 25^th February, 2014. We have shown Hindalco/ Nifty Ratio analysis which clearly suggest that, from the start of 2011, hindalco is underperforming Nifty. In the month from September to December 2013, this ratio tested the resistance of 0.20 twice but it failed to move above the same and moved lower, which suggested that weakness to prevail over short to medium term.

Hindalco/Nifty Ratio chart:

Wave Analysis:

As discussed in the previous update of 31st January 2014, “In short, as long as 108 is intact on upside and prices persist within the falling red channel our bias remains negative in this stock and prices can move lower towards the next support of 100 / 99”. BANG ON!!

Hindalco moved precisely as expected. Prices sustained below the strong resistance of 108, sustained within the downward sloping red channel and achieved both the targets of 100/99. After achieving the target, prices moved lower below 61.8% retracement level and closed on lower note since 3 trading sessions.

Above we have shown Hindalco/Nifty ratio daily chart since 2011. In 2011, ratio has formed top near 0.044, thereafter prices have been moving lower by forming lower highs and lower lows. This indicates the underperformance of Hindalco against major index Nifty. Time Cycle of 243 days works very well on this ratio chart. This is the Topping Time Cycle and it has provided the top for 2 times since 2011. Recently, ratio has approached the same cycle and reversed from the resistance of 0.020. In short, as long as 0.020 is intact on upside underperformance of Hindalco will continue against Nifty and it can move lower towards 0.011/0.10. 

As seen above in 120 mins chart, prices are moving lower in the downward sloping red channel brilliantly. As per wave perspective, intermediate wave …………..

Along with the ratio analysis, we have shown daily and 120 mins chart with Elliott wave count which helps to do better forecasting for future. In this challenging trading environment, it is better to use objective techniques. Just Subscribe to “The Financial Waves STU”which includes intense research on Nifty with 3 stocks where short term trading opportunity exits. By subscribing to this report, one can make his own trading strategy for better trading. For more information, visit to pricing page.

Hindalco: Why “Coalgate” SCAM did not help from trading perspective?

Hindalco has been in news for over past few weeks with regards to “Coalgate” SCAM.

Trading based on simply news can be very challenging. On 21^st October following news was announced – 

Hindalco Industries Ltd (HALC.NS) gain as much as 4.3 percent after Prime Minister Manmohan Singh's office says he is satisfied with the outcome of the process of allocating coal blocks to certain companies, dealers say.

The stock in today’s trading session is down by almost 2% and way down from 120 levels when the news was announced. Looking at the below chart it is difficult to even say that either positive or negative news has impacted the stock let alone trading based on news.

  

Hindalco 120 mins chart:

The above chart and below explanation is picked up from “The Financial Waves” short term update research report published on daily basis.

Wave Analysis:

Metal Index is one of the indices which started to outperform the market from the start of August 2013. During August we have witnessed one of the major downside corrections of 2013 in markets. However, during that period this index started to move higher. During this run up, Hindalco went up from 85 to 125 levels. However, from the mid September 2013, prices were consolidating between 125 and 110. Recently, it has breached important support of 110 and closed below that, which indicates ……

As per wave perspective, from the start of 2013 prices have been trading in flat correction pattern as primary wave B has retraced more than 61.8% of primary wave A. The break below 110 indicates that primary wave C has started on downside which can move at least towards ……..

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Hindalco: A channelized downtrend near completion!!!

By Waves Strategy Advisors, For more information visit www.wavesstrategy.com To subscribe to daily equity research “The Financial Waves” write to helpdesk@wavesstrategy.com or call on +91 9920422202 / +91 22 28831358

Hindalco is one of the classic example of a channelized move on down side. 

This article will help our readers how to initiate trades with the help of combining simple technical analysis like channels which played a significant role in determining support and resistances and Elliot wave counts in this stock.

The following excerpt is been picked from our report “The Financial Waves STU” published on5^th April 2013. Where we had shown how Hindalco respected the downward sloping channel and moved lower till 88 after making a top near 135.

Hindalco Daily chart:

Wave Analysis:

As seen in daily chart, after forming a distribution pattern near 135 levels prices failed to move above it and started moving down breaking its previous lows within the big red channel. Recently this stock faced the resistance of the upper trend line of the channel on 3^rd April and moved lower.

As per wave perspective, after completing wave C at 135 levels, prices are moving lower in double zigzag pattern and is currently in wave ….. of the second correction. This indicates that the downtrend is in later stages and should complete around … levels after which the upside correction of the entire down move from 135 to current levels can start. However for now the bias is negative as long as …… is intact on upside.

Following is more from the same report:

“An interesting observation is that in current fall Smallcap and Midcap sectors have managed to stay above the lows made on 28^th March 2013. We have been looking at many of the stocks like ADAG group – Rcap, Rcom, Rpower, Metal stocks like Tatasteel, HIndalco, Banking stocks like IDBI, ICICIBank, Capital goods like BHEL, LT. All of these stocks were the leaders on downside and started the down move even before the top was evident near 6110 on Nifty. Currently each of these stocks including NSE- Midcap index shown below has managed to stay above the previous lows. This indicates a positive divergence.”

Not only Hindalco but many other stocks and Nifty itself is at inflexion point!

To subscribe our services for the “The Financial Waves” research report a daily publication you can mail us at helpdesk@wavesstrategy.com or call us +91 9920422202 / +91 22 28831358 or visit www.wavesstrategy.com

Hindalco BLUE PRINT!!!

The below chart was published in Financial Edge Short term update, a Daily publication of Indian market. A few of the labelings have been purposely removed. Write to us on helpdesk@wavescapital.com if you would like to subscribe.

Hindalco Daily Chart

On the daily chart we can see an amazing scenario developing in Hindalco prices based on the study of Time cycles & Fibonacci relationship. The stock has retraced 61.8% of the entire upmove from 37 -250 levels.

Prices have corrected 55% from the highs of 250 levels in 233 days both 55 and 233 are Fibonacci numbers. Also the drop in value terms has been 140 (Fibo 144) and average per day fall is 0.60 (Golden ratio – 0.618). All this simply signifies the importance of Fibonacci series in stock markets. This also indicates the low formed at 113 is an important low and odds increases that this low shall be respected atleast for few weeks.

In our view the entire upmove from 2009 lows has rallied in an A-B-C formation. On the larger time frame we have shown the 328 days cycle and 82 period cycle. Both cycle has formed the bottom in first week of November thereby indicating that an uptrend can last till February 2012.

To get the short term and medium term price targets with crucial risk management levels write to us on helpdesk@wavescapital.com

Happened: Negative Confirmation!

DLF

Hindalco

ICICIBANK

Sensex

Explanation:

As mentioned on 2nd April (Sunday) Sensex did open a gap down on Monday and we did see an impulsive move down continued today taking Sensex below 17200. This wave down today looks like a start of minutte degree wave 3. Given the steep fall in US and European markes expect selling pressure to intensify further tomorrow.
DJIA is falling with rising US Dollar, steep rise in VIX, rise in Bond prices, steep fall in copper, silver, oil all pointing only in one direction!
We also said how badly complacency will be punished and that is what has started.Immediate target for Sensex now lies at around 16000 where it shall find some support before another leg down.
I have said in my previous blogs many times that the top outperformer - METALS will be the worse performer. The time has gone for bottom picking but using every rise to go SHORT.

Happened: The Breakdown! An impulse down

Strategy to adopt:
Trailing stoploss methodology is an ideal strategy to follow now if you are well in the game! Indian Markets are rather moving very fast and can move faster than we think. Selling on targets might deprive you of some exorbitant returns which otherwise would be possible! Just think...
Sensex

The move down on Sensex is of impulsive structure indicating we are in for some major correction in coming weeks!
Regional rallies on 30th failed to reduce the pessimism - A sign of worry!
We have shown the Sensex target zone for first time on 11th October, before the meltdown and also warned, if you refer our previous blog on 4th October, "....any long positions shall be immediately covered as this market will not give much clues when it turn"
Hindalco

We showed probable path of Hindalco on 11th October, but we were little early. It is always better to be earlier than late!
We are expecting a meltdown in Hindalco prices soon in form of wave iii
Suzlon

Suzlon has broken down from triangle pattern of corrective Y.
Happened: We mentioned in our previous blog: "A strong breakdown...."
I will not be surprised to see this stock at previous low of March i.e. near 35 range!
Maruti

A clear H&S breakdown!
We mentioned a trendline break in Maruti before it happened
We showed an up arrow a few days before 29th October, indicating Maruti is following 29 days cycle and a temporary support possible. Prices rallied on exactly the same day. This shows how precisely prices can sometime follow cycles!

A breakdown: Sensex, Hindalco, Suzlon, Maruti!

Sensex

Explanation

Our preferred view on Sensex is down!
More negative confirmation will be obtained on a move below 16600

Hindalco

It is plausible to count move up in Hindalco to be complete in a Z wave
Prices broke below mid channel line support
We do not rule out the possibility of prices retesting the highs of 144.50 but a break below 132 will increase our negative bias
USD/JPY prices rallied more than 3 percent in less than 3 days, a sign of Dollar strength
One can initiate short position on Hindalco only once it breaks below 130 levels

Suzlon

Suzlon - A strong breakdown! This indicates more downside possible

Maruti


Maruti 29 day Cyclicality and Left translation suggests further weakness to come in the stock. We expect a trendline break!

Negative bias on Sensex but minor positive on Hindalco!

Sensex


Sensex has followed exactly the paths that we have shown (blue line) since last few weeks
Prices today decisively closed below the trendline connecting March lows
This can be a start of a bigger correction as wave count also looks complete
A move below 16600 will confirm that we are in for a major correction atleast till our target zone (as shown)
One can initiate a short positions now with a stop loss at wave (5 ) high, Risk reward ratio looks quite appealing!
Hindalco

We are expecting a final wave Z up in Hindalco
We have already completed 5 waves of wave Z and I expect this to be a 7 wave move
A small minor retracement was expected which happened today and now a final up thrust near 150 levels is where this entire rally since March shall end
Copper & Gold has also given an upward breakout out of triangle. So the final rally shall end soon in commodities now
Hindalco is a stock within Sensex and we have negative view for Sensex but minor positive view for Hindalco
We sometimes have to look stock movements independently irrespective of its correlation or Beta with index
After all Beta is also not a perfect measurement of risk as we need to consider times when deviations happen in either direction and it is just an average of large sample which gives us 1 single value
Also main reason for tracking Hindalco so closely is -- lately it is acting as a good proxy for tracking commodities: metals and this is the space which we expect to lead the fall globally !

Nearing the end - Rally since last Oct 08'

Sensex

Explanation
We mentioned in our previous blog that "we are expecting wave 5 of 5 to rally atleast till previous highs - 17200" and we also mentioned in September 09 blog probable target for Sensex near 17450 levels.
Sensex made a high of 17350, falling only a 100 points short of our target shown in September
Prices can now turn anytime soon but a short position shall be initiated only on break of the trendline shown from March lows

Hindalco


Prices have rallied so far in a 3 wave up and are showing signs of exhaustion but we cannot rule out the possibility of rally near 140 - 145 levels
We do not have any preferred wave count as of now
A short position can be initiated if prices break below 126!
We are also keeping a close watch on US dollar index (DXY) and Copper
Bottom and top picking is something I leave to most experienced traders but we shall obtain confirmation from DXY (Dollar index shall bottom out) as Hindalco starts cracking down!
DXY impulsive move above 76.50 - 77 is what we want to see which will induce weakness in global commodities and in turn in Hindalco

Sensex: Time cycles. Gann and Target zone, Hindalco: Probable path

Sensex

Sensex is showing a very weak structure. We are expecting wave 5 of 5 to rally atleast till previous highs - 17200 but there is an increasing possibility of it being over 2 days back
We gave in our September 09 blog probable target for Sensex near 17450 levels. Sensex made a high of 17195 this week.
Prices are at kissing level from the trendline connecting March lows. If prices have to rally in 5th wave it has to be now else we might see an increasing downward pressure.
Global markets rally, Better than expected Infosys results and Reliance Ind declaration of Bonus issue failed to lift the spirit of the market. This is a warning sign!
A fall from here will also represent an important break of "Gann angle"
Time cycles (shown as vertical blue line) also suggest we are in danger zone!
We have shown Target Zone for Sensex and will evaluate this further based on price behaviour next week. We should still wait for confirmation before pulling the "short trigger" on Sensex.

Hindalco

In our previous blog we stated move down in Hindalco as a 3 wave move but a close observation on intraday charts reveal an impulsive 5 wave structure down. We will keep this as a preferred scenario for now and wait for further developments. If prices rallies from here till upper end of the channel i.e. near previous highs of 140 then we need to adopt alternate count shown in previous blog.
Wave 2 is now in zone of wave4 of one lesser degree of previous wave1. An ideal place for wave 3 to start!
Also we have shown probable path for next few weeks for target of 101. Prices should turn down now if it has to follow our probable path. We will evaluate the validity of this path as wave structure develops next week.

Hindalco: A perfect setup!

Sensex

Explanation
Wave (3) of final wave [5] looks to be over. We are now expecting wave [4] to start and a very small wave (5) of [5].
The best of the rally of final wave [5] is behind us and we expect a correction now!
As we stated in our previous blog, any long positions shall be immediately covered as this market will not give much clues when it turn.
Hindalco

We are measuring the pulse of Hindalco pretty accurately!
It looks like a perfect setup to go short on this stock as wave 2 / b is over and wave 3 / c of minor degree shall start now.
Initial target is 115 and then to 101. We will evaluate further path after this target is achieved.
The up move correction since March looks complete and we are expecting this as a strong down impulse move!

Sensex: Intermediate peak in early October?

Sensex

Explanation
Prices behaved in line with the pattern we showed a few weeks back but the magnitude of rally is not quite as expected in a 3rd wave.
There is an increasing possibility of this final rally developing into an "Ending Diagonal". Please do not initiate any long positions now as risk reward ratio is not in favor of bulls and the global markets are showing signs of acute weakness.
Last year in October Sensex formed a major bottom but "Time Cycles" suggest, we will form an intermediate top in early October this year.
Hindalco

One can initiate a short position on Hindalco as prices broke below mid channel line @127 (recommended in previous blog) but beware of the possibility of a minor bounce back till 130-132 levels since short term RSI is in extreme oversold condition. Any bounce should be a good opportunity to initiate short!
Copper moved impulsively down today to 267 levels confirming weakness in the commodity space
Targets for short term on Hindalco is 115 and then101. We will review if pattern changes

Hindalco - Targets Achived! , Yes Bank - Good opportunity!!

Sensex

Explanation
Let us stick with this alternate count which we have presented since last week. Markets are behaving as expected in this pattern. We will review if lower trendline is broken
Sensex have given a decent rally in last 2 days
I am not here to catch a top in this rally and I would suggest you not to fall in that trap. Only if prices break below trendline we can evaluate alternative wave pattern

Hindalco

TARGETS ACHIEVED!
Hindalco achieved target of 131 as stated in our previous blog i.e. 14% return in just 1 week!!!
Please book your profits for the remaining positions at this level. More aggressive traders can use trailing stop loss method (SL @ 125)
We are keeping close watch on this stock to see when reversal might occur
Time cycles suggest we are nearby forming a peak this week

Yes Bank

Recommended by Vishal Dalvi
Yes Bank - Good opportunity!
Yes Bank is forming a very appealing pattern - an ending diagonal
It provides an amazing opportunity to go short on this stock but "only" after we get a price confirmation that the pattern is over
A short position can be initiated if prices fall below 174 with a target of 130 - 135
We can see a throwover today and prices shall reverse anytime soon but if prices continue to rise we may need to adopt alternative counts

The momentum is strong so please do not initiate a short position unless a confirmation in price is obtained!

Bearish implications VOID!

Sensex alternate count

Explanation

We will adopt this alternate count only after reviewing price action for next few days. As per this count we have target for Sensex of 17500. Lets wait and watch!

Hindalco alternate count

Explanation

Price decisively broke upwards with large volumes out of triangular pattern

We do not have any preference view but above chart gives an alternate view

We will adopt this alternate count only after reviewing price action for next few days

Upside target can be around 131 as per this count
DXY finally broke downwards and moved even below 77.50 making the bullish pattern void! (atleast in short term)

More aggressive traders can go long on Hindalco with strict stoploss of 109

Sensex 2009 new high!

Sensex

Explanation

Sensex made a new high today but the elliott pattern is not very clear. It is more corrective than impulsive. Sensex still looks to be in a complex mode
Today's new high asks for cover of any short positions and wait for the pattern to become clearer

If prices start moving up impulsively from here on we will need to adopt an alternate count. Lets give this negative view more 2 days to prove its validity.
A break of upward sloping trendline from March low onwards will be a good opportunity to short

Hindalco

Hindalco looks still in a consolidation mode with no clear direction of breakout
Volumes are drying up everyday
Prices are very near to upper boundary and a break above the trendline with large volumes is what we should look for to cover any short positions
We are expecting a clear direction before end of this week
If price is able to move past 112 mark and stays there please cover your shorts

Patience is virtue!!!

Explanation

Patience is virtue in 4th wave corrections
Sensex is forming a complex pattern which should resolve lower
It is frustrating for a short term trader to be caught in such a complex pattern but it always helps to assume 4th wave as a complex correction even before it develops. It can save a lot of mental energy
We have a clear divergence in RSI
One can initiate a short position at this level with stop loss at top of wave b. The risk reward ratio looks appealing
Hindalco

It has been almost a month since Hindalco is moving in a very tight range.
It is imperative not to loose patience as Mr. Market has not proven us wrong till now, stop loss level at 116 is still intact
Please bear in mind Sensex has reached near its previous top but Hindalco is still ~6% below the high it made since March

Confused correction!

Sensex

Explanation
Sensex looks to be in a complex 4th wave correction
The momentum is continuously decreasing
Avoid any long positions in this "sucker" rally
Global markets are not looking good, with Chinese market weakening everyday
DXY has given a good impulse wave up and should head for a big rally
Copper looks to have formed a major peak around 293
We maintain our negative bias as long as 15970 is not taken out

Hindalco

Explanation
Hindalco is relatively very weak and the momentum is also downwards
We still maintain our negative views on Hindalco as long as prices do not break above 116 levels