Moving averages: How can it be used to form trend following system?

Moving averages are basic yet powerful tool to stay in the trend. In this webinar see how one can use multiple averages to stay in the trend. Visit https://www.wavesstrategy.com

Video update: How to combine Moving Averages along with Elliott Wave?

#ElliottWave news channel is a short video series. Ashish Kyal of http://www.wavesstrategy.com/  will be going live weekly at 4 pm every Friday. Stay tuned to know the current technical state of markets and learn more on advanced concepts of Elliott wave, #Neowave and #TimeCycles.

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Application of Channels, Moving averages, Fibonacci on Sunpharma!

Many think that market moves in random fashion and there is no way to trade or invest it with objective tools. However we differ from it and suggest that objective technical tools can provide fruitful results from short, medium to long term perspective. We are not just saying but proof of the same is shown below on Sun Pharma chart with applied basic technical analysis  like Channels, Moving averages and Fibonacci. Here we can see that how prices have reacted post touching channel as well as 61.8% Fibonacci retracement level.  

Sun Pharma 60 mins chart: (Anticipated in the morning of 27^th January 2016)

Sun Pharma 60 mins chart: (Happened on 29^th January 2016)

(part of research taken from The Financial Waves Short Term Update)

Wave analysis:

CNX Pharma index has been moving in sideways to negative action from the start of 2015. Recently this index tested the support of important channel and has formed Hammer candlestick in last week. This indicates that buying attempt was witnessed in last week from lower levels. Prices have taken out the high of last week which suggests positivity over short term. In this case Sun pharma can be one of the stocks which can show upside trend in coming days.

As shown in 60 mins chart, prices have taken out the last leg of down move with strong momentum which indicates that consolidation is over and trending move on upside can continue. On downside 775 is the important support where channel is placed.

In short, Sun pharma near term trend is positive with the support of 775 for a move towards 840 levels.

Happened:  As expected Sun pharma continued the positive trend and achieved our mentioned level of 840 on 29^th January 2016. Post that once again prices have reached toward crucial juncture, so what should be the trading strategy now?

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Nifty under pressure but not because of Argentina issue!

Bottom Line: Nifty did not take out the previous day’s high even though it was only 7 points away from Wednesday’s close.

The below research was published in today's morning research report "The Financial Waves short term update" by Waves Strategy Advisors. For subscribing to daily newsletter with stocks, Bank Nifty, Nifty and much more subscribe by visiting http://www.wavesstrategy.com/index.php/store.html

Nifty daily chart:

Nifty 60 mins chart:   

Wave Analysis:

In previous update we mentioned that “In short, volatility can be high due to expiry and it will be crucial to see if prices can manage to cross above the level of 7810 or not. Move back below 7740 will keep the trend negative”

Interestingly, Nifty did not have a single tick in positive territory throughout the day. The previous day high at 7798 was not challenged at all which was only 7 points away from Wednesday’s close. This has kept the daily bias negative as per bar technique since previous day high was not taken out. There are times when a few levels are very crucial and if the trend has to continue markets invariably respect those levels.

The high made by Nifty is at 7791 and prices flirted around this level till 1 pm. The selling pressure intensified post 1.30 pm and index touched the low near 7711. The movement was a mirror image in opposite direction compared to that of Wednesday when the sharp up move was seen post 1.30 pm. It is therefore important to see the price action on follow-up day and just 1 day of movement is unreliable. If Nifty manages to break below the low of 7707 it will break 2 days low and a close below the same will further confirm the negative trend ongoing over past few days.

As shown on daily chart, prices have broken below the red 5 days Exponential Moving average and now reaching near the 20 days EMA. This 20 days EMA is breached only once post the rally from 6770 levels and a close below the same which is at 7685 can intensify the selling pressure. This is also near the level of 7690 which we have been mentioning as important all the while.

The short term chart shows that the up move from 7422 might have ended near Wednesday’s high at 7798 and not before. A decisive break below 7690 will confirm this scenario and prices can then head towards 7500 - 7540 levels. Also a truncated wave can result into violent move in opposite direction i.e. on downside. So we continue our negative stand as long as 7790 is intact.

In short, today is follow-up day to yesterday’s selloff and it will be crucial for prices to close below 7707 followed by 7690 to keep trend negative. On upside 7790 can now be used as crucial risk management level for existing short positions against 7810 mentioned earlier which is still intact. It is better to follow trailing stop method if a trending move emerges from here!

The below research was published in today's morning research report "The Financial Waves short term update" before markets opened by Waves Strategy Advisors. For subscribing to daily newsletter with stocks, Bank Nifty, Nifty and much more subscribe by visiting http://www.wavesstrategy.com/index.php/store.html