Nifty: How to combine Time cycles, Patterns, RSI all together?

Many believe in keeping it simple to trade. I wish if markets moved in non – complex structure it would have been easy to make a killing! As the movement is the outcome of collective psychology of the crowd it is not easy to measure by using just one basic indicator.

I combine the best of the techniques irrespective whether it belongs to fundamental, technical or any other genre that you classify. It does not matter as long as it helps me to increase the accuracy of research and trading.

Below is the chart picked up from the daily equity research report that shows short term Elliott wave counts along with Expanding pattern, Relative strength index (RSI) indicator.

Nifty 60 mins chart:

Part of the below research is picked up from daily report – The Financial waves short term update

Nifty had a Gap up opening in the previous session and prices continued to rally throughout the day. The beaten down sectors and stocks were the major gainers and the Smallcap index was up by 2.31%. It is interesting to see how fast the sentiments can change. The major move on the downside was due to lack of buying interest and now over two days Smallcap index has gained by more than 4%. So as a trader one has to be fast enough in booking profits and changing the stand else you can get stuck in a winning position.

As shown on daily chart, (shown in actual research report) Let us see if there is some consolidation again from here to digest the rise or a strong momentum emerges that will break above the upper end of the bands.

As shown on hourly chart, there is possibility that wave b of wave g is over at the lows and wave c is ongoing. This we will keep as preferred scenario as long as the Gap near 10700 is protected. Move below …… will increase the odds that wave b is not over but forming an Expanding triangle pattern. The reason for citing this as a possibility is because one more Time cycle is bottoming out in next 4 trading days and so this scenario cannot be ignored.

RSI has also entered into the overbought zone. In entire May RSI has failed to decisively break above 77 and has reversed from there multiple times. This indicator is now back towards the same zone and so some consolidation or minor dips can be expected.

In short, ……

The above research clearly shows how various techniques are combined together to derive a view. As the cycles near the bottoming phase it is time again to be ready to pull the trigger. We will be mentioning it in daily research report the key levels and trade setup not only on Nifty but on Bank Nifty and stocks as well. Subscribe NOW

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Nifty and Reliance Industries correlation and breakout zone!

The below excerpt is picked up from "The Financial Waves short term update" by Waves Strategy Advisors. For subscription to daily research report visit www.wavesstrategy.com

Date: 24th March 2014 morning report

Nifty formed an inside bar smaller than the previous bar. Reliance and Nifty both at crucial levels! Nifty levels to watch are at 6580 and 6430. The below research gives a brief overview on correlation between Reliance Industries and Nifty.

Nifty, Reliance and Ratio daily chart: 

Wave Analysis:

In previous update we mentioned that “In short, there is no change in our outlook as of now which is sideways to topping. Even the stocks are not providing a clear direction. Break of crucial levels shown on chart will determine the trend over short term and intensity of the movement will indicate medium term outlook”

Nifty continues to move in 35 to 40 points range. On Friday, the movement was confined between 6520 and low near 6485 thereby forming an inside bar. It has been 9 days and prices have swayed between 6575 and 6430 which is a movement of 135 points in totality. Saturday was a short trading session and hardly produced any movement.After the sharp up move of 3 to 4 days markets are ensuring to form a challenging trading environment. During sideways action the best technique that works is Bollinger bands and we have used it prudently. The short term wave counts have 2 to 3 different possibilities even now and channeling technique is suggesting there is not much room left on upside. Nevertheless looking at sideways action after sharp rise there is still a possibility that one minor leg towards 6580 – 6630 might be pending. On contrary, violent break of 6425 will indicate atleast retracement of the up move from 5980 to 6575 has started. A slow and sideways drift below 6425 will not carry much importance. So it will be important to see the intensity of move when 6580 or 6425 is broken.

Nifty and Reliance Industries correlation:

On the 1^st chart we are showing similarity of pattern between Reliance Industries and Nifty. Both the stock and index looks to be forming a triangle pattern. This corrective pattern is ongoing since 2008 onwards. The reason of comparing the index with Reliance Industries is that we think this can be one of the stock which will be leading the index in next Bull Trend. So a breakout on RIL will indicate a breakout on index as a very high possibility. However, even this time RIL came close to the strong resistance zone near 910 – 930 and reversed back on downside. It has been more than a year since this stock is moving within the range of 770 – 930.

Reliance is forming a symmetrical triangle whereas Nifty is forming more of an ascending running triangle pattern. To get confirmation of triangle breakout we should see a sharp and violent rise after the breakout and if the momentum continues to be slow and dragging even if the trendline is broken we will look at it only as the part of the pattern formation.

Even though Reliance has been a major laggard post 2008 but the correlation has been very high with index with each major turning points happening within few months horizon. The ratio of Reliance / Nifty (red line) shows that the gradual reduction in slope of the fall indicating that thee underperformance has been constantly reducing. A break above 0.16 level will be first strong positive sign that Reliance has started the period of strong outperformance for months to come.

In short, expect a breakout to occur in this week as the sideways correction is already 9 days old. Also a close watch on Reliance Industries is imperative in case this stock leads the direction of movement for major market. Till that happens patience will be warranted!

The below excerpt is picked up from "The Financial Waves short term update" by Waves Strategy Advisors. For subscription to daily research report visit www.wavesstrategy.com