Nifty: Applying Hurst Time cycles and Neo wave indicating matured stage of up move!

Bottom Line: Nifty, Sensex, DJIA (USA), S&P 500 (USA) – touched life time highs. BOJ announced unexpected increase in its bond buying program at unprecedented levels!

The below research is picked up from "The Financial Waves short term update" by Waves Strategy Advisors. For subscription to this daily research visit http://www.wavesstrategy.com/index.php/store.html

Nifty daily chart: showing Hurst Time cycles with Neo wave counts

Hurst Time cycle Analysis:

In today’s update we are showing the complex Time and Price forecasting method that helps us to understand the overall maturity of trend from both Time and Price perspectives.

On Friday, the strong rally was seen not only in Indian equity markets but across the globe after Bank of Japan unexpectedly announced increase in their Bond buying program. On one hand US has reduced its monetary easing program whereas on other Japan has increased annual target for enlarging the monetary base to 80 trillion yen ($724 billion), up from 60 to 70 trillion yen. This will lead to printing of Yen at unprecedented levels resulting into sharp depreciation in JPY against USD which is now quoting near 112 from 78 (seen in 2013). Nikkei 225 (Tokyo index) was up by 4.83% (755 points) a huge gain for an equity market of a developed economy.

Now let us look at Nifty from Time cycle perspective:

Hurst Time cycles: are shown on the daily chart that highlights the probable turning junctures. Cycles help us to capture the Time element whereas Neo wave & Elliott wave helps us to understand the Price projections. At times when prices are moving in complex corrections projecting price with high degree of accuracy is a challenge.

J. M. Hurst developed the concept of standard cycles that work across the market at all the times. There are a set of standard cycles that we have to look at which will help us understand the crucial lows. Cycle lows are synchronous whereas tops are dispersed. So we need to use this technique to understand crucial tops only with caution.

The daily chart shows application of 108 days cycle, 54 days cycle (black), 28 days cycle (red) and at the lower section each of the subsequent cycle lows are highlighted by star mark.

Now the above chart highlights that prices are in second half of the 108 days cycle which means that this cycle is due for a top. The reason for still seeing an uptrend is that within this 108 days cycle the 54 days cycle made its low on 17^th October and is now only 8 days old. An ideal top should be formed near 20 to 25 days of this cycle since 108 days top has already passed out. This gives a probable time frame as latest by third week of November for crucial top. The cycle top has shifted from October to November given the number of holidays we encountered in October and the entire calculation is based on trading days.

Projecting Time using Neo wave:  One very important pattern described in Neo wave (Advanced Elliott wave) is Diametric pattern. This pattern consists of seven corrective legs (labeled from a to g) and each leg tends to follow equality in terms of price and / or time. The blue box shown on daily chart shows except the first leg that was driven largely by election event, each of the up leg has been tending towards equality in terms of price and time. This when combined with the crucial red channel coincides with the upside range for the current rally as 8350 to 8420. Prices are now in the 7^th leg i.e. wave g of the pattern and should follow the probable path shown above.

Please note this path is based on the assumption of the ongoing diametric pattern. In case we continue to see strong positive bars even in current week then chances of this pattern forming might reduce. Nevertheless, time cycle is also suggesting that the 108 days cycle has entered into its second phase that should be associated with loss of momentum.

Based on the above techniques along with channels we continue to believe that the medium term trend is in matured stage. However, over short term there is no reversal bar so far with each bar closing above previous high and so the trend will continue to be positive.

Existing longs should follow trailing stop method and now use Friday’s low at 8198 as stoploss. It is prudent to avoid catching a top here since daily momentum is strong so far.

In a nutshell, the probable path is as shown based on Neo wave and Hurst Time cycles but it is prudent to stay in direction of the trend which is currently positive and use 8198 as stop level. On upside, 8350 to 8420 is the next resistance range! 

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Maruti has continued to show strong outperformance with overlapping fall & impulsive rise!

Stock specific movement has continued in Indian markets with auto major like Maruti showing strong impulsive move on upside and overlapping corrections intermittently retracing these upside moves.

Understanding the pattern of correction can help us the gauge the size and magnitude of next leg on upside. Below is the hourly chart of Maruti picked up from “The Financial Waves short term update” published in morning of 21^st October 2014.

Maruti hourly chart: as shown on 21^st October 2014

Maruti hourly chart: as of today by 11:45 am

The below article is part of the research published on 21^st October 2014

Wave Analysis:

Maruti is one of the outperformers from the index. In the above daily chart we can see that prices have hardly retraced the prior down move when Nifty has showed move from the level of 8160 to 7730 levels. The correction in the stock of Maruti is more of time correction which has arrived at the crucial levels. Currently prices are intact in upward moving blue channel. Medium term investors can trail stop towards 2800 levels which will confirm break of 50 days Exponential moving average, pivot low and important channel.

As shown in 60 mins chart, in the last trading session prices have given breakout of the pennant formation with gap up action which is positive sign. Now, an hourly close above 3020 will confirm that upside trend has started. On downside 2900 will act as an important support where channel is placed.

In short, close above 3020 will confirm start of upside trend and then move towards 3120 is possible.

Maruti showed strong performance today itself and stock has surpassed above 3120 levels. So is it right time to enter the stock now? Probably not because the risk reward is not fitting well and the indicators are in overbought state. Nevertheless, existing long positions can use trailing stop method to ride the trend…

“The Financial Waves short term update”is a daily research report which is published before equity market opens. It has short to medium term view on Nifty and three different stocks on daily basis with Applied technical analysis, Elliott wave counts, crucial levels to watch. The report is delivered directly to your mailbox and is useful for traders, investors, and students of markets who want to learn practical application of systematic market analysis! For subscription option please visit http://www.wavesstrategy.com/index.php/store.html 

Nifty: Hurst Time Cycles and why we think it is extremely important to apply with Elliott wave!

Nifty: Hurst Time Cycles and why we think November 2014 to March 2015 can be a period of accelerated selling!

Indian markets have continued to inch higher everyday and has crossed above the psychological level of 8000! Crossing of psychological levels can create euphoria as the news will be all over the place across media and retailers might get carried away exactly at the wrong time. We are not saying this rally is ending right now but it is important to adopt stringent risk and money management strategies since the current up move is in matured stage.

This time we are using a different concept – Hurst Time cycles to highlight why we think that the fuel is running out.  Nevertheless, please understand the short term trend for now is positive and detailed analysis is given in our short term update daily research. However, from Investment perspective this is not the ideal time and November 2014 to March 2015 can be a period of accelerated selling!

Let us look at below chart and the explanation on why October month can be important topping process!

Figure 1: Nifty weekly chart: 

Hurst Time cycles: J. M. Hurst was an aeronautical engineer who applied the advanced concepts of physics and cycles to stock markets. He had scientific approach to cycles and came out with conclusion that there are certain standard cycles that freely traded markets follow irrespective of their demographics or asset class.

Understanding Nominality: A few standard cycles that tend to work across are 54 months (230 weeks), 18 months (80 weeks), 9 months (40 weeks), 20 weeks and 10 weeks. Going on lower degree scale there are again a predefined set of cycles that can be applied right from daily to intraday charts. These are nominal set of cycles.

Understanding Harmonicity: Cycles are harmonious in nature and are normally governed by the factor of 2 except the 54 Months cycle which is harmonious by factor of 3. This means that as 54 months cycle exists there is 54/3 = 18 months cycle, 18/2 = 9 months cycle. So 54,18 and 9 months become important set of predefined cycles.

Understanding Synchornicity: This concept of cycle science indicates that cycle lows are synchronous in nature. It means that if the larger cycle is forming a low then the smaller cycle by default forms a low at that point. So a 54 months cycle low will result into lows of 18 months, 9 months and so on.

The above 3 concepts are the building blocks of cycle theory and makes it very easy for a cycle analyst to predict important turning junctures.

Let us now move on to applying these techniques to Nifty chart and see the important information we get using this Advanced Cycle concepts!

The chart shows 5 important cycles derived from the nominal set of 230 W, 80 W, 40 W, 20 W and 10 W (W – weeks). To start with we are assuming October 2008 as the major low. The actual cycle close to this nominal set is 252 weeks that we have applied. So if 252 W cycle has bottomed in Oct 2008 then all the lower cycles should have bottomed exactly at same time. The different vertical lines on chart represent different cycle lengths and at the bottom the cycle lows are also marked with stars for easy reference. So a star marked against 230 w cycle shows a low formed there. This cycle then bottomed out in August 2013 and both of the times we have seen strong multifold increase in prices post the cycle bottom. The next low of 252 W cycle is now in 2018 which can be year of major bottom.

The cycles that are most important to us are 84 W (nominal cycle 80 W) and 41 W (nominal cycle 40 W) that determines the medium term trend. As per 84 weeks cycle prices are now in the second half of cycle which is associated with topping formation. 75% of the cycle completion is the area of maximum downside acceleration which is coming in November 2014. By December 2014, 41 weeks cycle will also enter into its 75% completion stage and this can put pressure increasing the downside speed. Both of these cycles have bottoming period in April 2015. Post that, we can expect uptrend to resume. So as per, Hurst Time Cycle analysis we get a window of November 2014 to March 2015 which can be period of downside correction and an important low can be formed in April 2015.  This gives us fair idea with respect to time.

Please remember the drawback of cycles is that it has high predictability during important lows but topping process can be time consuming and challenging to predict. The best possible probability looking at the various cycles is that October can be the month where a medium term top can be formed and November 2014 to March 2015 can be a period of accelerated selling. So September can still continue the uptrend for now as long as important supports are not broken. We have so far talked about Time but it is apparent to look at price as well and the pattern that will be in sync with the forecasted time element.

Neo wave running Triangle pattern: Here we are showing a running triangle possibility using the Advanced concepts of Elliott wave – Neo wave. As per this theory all the legs are corrective in nature. Even the rally from the lows of August 2013 is part of correction. Corrective waves not necessarily end below the previous up wave but can end above the high of previous up leg. We call such corrections as running since the correction does not produce any price retracement. Currently, wave [D] is on going on upside for the target near 8270 – 8300 based on projection of wave [B] equal to wave [D]. Please bear in mind that the upside projection is given based on Fibonacci level and should NOT be used as ultimate target since there are no price resistance. But looking at Time cycle this looks the most probable pattern and reversal area. To get better turning areas it is important to look at short term charts and patterns mentioned in the daily research report.

In a nutshell, for now, avoid catching a top as this rally can turn euphoric and prices can move beyond the given target zone which is only based on Fibonacci projection. The best probable path is shown on the chart. For medium term investment positions use 7600 as an ideal stop and it is better to be out if prices break below this level as the next leg on downside can then start that can take Nifty towards 6200 – 6300 support zone by April 2015. For now, stay in direction of the trend which is currently upside and follow trailing stop methods to get the most out of the current leg of euphoria!!!

Training Workshop in Mumbai

Attend the 2 days training workshop that will provide in-depth analysis on Advanced concepts of Elliott wave – Neo wave and how it can be combined with Time cycles. This is one of the most advanced training in technical analysis. It focuses not only on Price but also on Time which is an important element for any trader or investor. There are no shortcuts to Trade or Invest profitably. It comes with lot of research, psychology, objectivity, tested methods. The above study ensures increasing the probability of success while trading and also highlights the area when one should be patient and avoid taking positions. Making money is one thing but to preserve what is made is the Key to trading success!!!

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Will Apple’s new smart device help its stock prices?

Apple Inc has been everyone’s favorite investment and has exponentially multiplied itself over the years.

After the split 1:3 around 90 levels the stock is back near to its all time high!

Apple chart:

As per the Elliott Wave perspective, prices completed primary wave III at 100 levels and since then moving in wave IV. Internal structure of primary wave IV suggests that it is probably forming flat correction (A-B-C) where intermediate wave A completed at 55 levels and thereafter moving higher in form wave B in which minor wave c is ongoing. Hence after completion of wave B, we expect the stock to move lower in intermediate wave C. Now, any move below 80 levels will suggest that intermediate wave c has started on downside whereas on upside 100 will be an important resistance.

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Nifty: TRIN indicator, Elliott wave, Time cycles path ahead

Bottom Line: TRIN indicator shows lot of volume already gone into short side without producing any meaningful correction confirming that 1 leg is pending on upside.

The below research is picked up from 23rd June 2014 morning research report of "The Financial Waves short term update" by Waves Strategy Advisors. For daily view on Nifty and 3 different stocks with complete Elliott wave counts, Time Cycles, combination with indicators like RSI. For subscription visit http://www.wavesstrategy.com/index.php/store.html

Nifty daily chart: (as of 23rd June morning research report)

 

 Nifty 60 mins chart:    

Chart courtesy: icharts

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Wave Analysis:

In previous update we mentioned that “In short, it has been almost 9 days of correction so far and a trend is due to start. Faster move above 7600 will provide 1^st positive confirmation for a move towards 7800...”

Nifty continued to show weakness on last day of the week and closed below the previous week’s low near 7510 levels. The trend has been range bound in entire last week and the correction has already taken 10 days now. We continue to believe that one leg on upside is pending which will complete the ongoing move from 6630 levels.

As shown on daily chart, it seems the entire of the current up move is probably wave c or wave 3 which is subdividing into 5 waves. Either of the scenarios is indicating that wave iv is ongoing and once it is complete we should see wave v towards 7800 levels. This wave v will also lead to negative divergence on daily RSI which will further confirm short term topping process. The probable path over next few weeks is shown above but it is prudent to wait for price confirmation above 7600 for a move towards 7800 levels. Also near those levels we will have to closely watch the momentum and overall participation. If it is strong the current leg can extend further but if the overall breadth continues to deteriorate it will indicate a final wave v before we move down back towards 7400 – 7250 levels. The ongoing structure also looks like a wedge shaped formation with each of the up legs getting smaller. Again, development of wave v will provide vital clues & confirmation to this pattern.

Coming to short term, wave iv is ongoing in the form of double corrective pattern enclosed within the red channel. Prices are on verge of completing wave c of iv and a faster retracement above 7600 followed by 7650 will confirm that the low at 7500 is in place.

TRIN indicator measures in which direction volumes have been moving and whether the conditions overbought or oversold. We can clearly see that this indicator is at the level last seen only in September 2013 before the rally started. This indicates that lot of volumes have already moved to short side but did not produce any meaningful correction. The indicator is now in oversold zone (it is opposite compared to RSI) and some relieving action is accepted. This will result into an up move from current levels on Nifty and down move on TRIN.

In short, the indicators and other parameters are suggesting that the correction should complete and we should see an upsurge in Nifty but the confirmation of the same will be obtained only above 7600 levels. On downside 7480 will act as an important support and break below it will extend the current correction towards 7450 – 7400 levels.

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Nifty: Time cycle day and crucial support near 7500 zone!

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Bottom Line: Nifty had a sharp fall below 7580 level in last day of the week. The trend reversal confirmation will be obtained only on lower high and lower low formation.

Nifty daily chart:

Nifty 60 mins chart:    

Elliott Wave Analysis:

On Friday, Nifty traded in a narrow range during the opening hours but selling pressure started to build up post 12 pm. The breadth slowly started deteriorating and as soon as 7580 level was broken there was sharp selloff across the board with prices making a low of 7525 during the day.

On weekly basis, Nifty has still managed to form a higher high low bar which will keep the medium term trend positive as of now. A close below 7500 by end of current week will indicate a reversal.

Looking at the options, there is highest Call OI buildup at 7800 levels and highest Put OI buildup at 7500 levels. So this can be the ideal range between which we should see the movement. Nifty closed very near to the lower end of the range at 7542. Move back above 7600 can generate buying interest but protecting 7500 on downside will be very crucial.

The Time cycle of 49 days is due today and it is unclear if this cycle has already formed a top now on Friday or will form a bottom. A sharp reversal from here will indicate bottom formation whereas continued selling pressure and a clear lower high and lower low formation will indicate a top is formed.

Nifty has now broken below the short term blue channel but at the same time RSI has arrived near the support of 30. So even if the downtrend has to continue short term pull back cannot be ruled out. A lower high and lower low formation on hourly chart is an ideal scenario to confirm trend reversal. So far by break of channel and 7580 level prices have formed lower low but has not yet formed lower highs a precursor for trend reversal. We have seen before as well that break of channel has failed to generate selling pressure unless a lower high is formed. So if prices show temporary upside pull back and does not move above last week’s high followed by break below 7500 it will give an ideal trend reversal confirmation.

In short, next 2 to 3 days will be important. A reversal back above 7650 will resume the uptrend whereas break below 7500 which is also the previous Gap area can keep the short term trend negative but as indicators are in oversold state some relief rally is plausible.   

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NSE Midcap Impulsive possibility as per Elliott wave

The below research is picked up from "The Financial Waves short term update" published on 12th June morning before markets opened. 

NSE Midcap index has strongly outperformed over past few months. Following chart clearly shows the up move.

NSE Midcap Index Weekly chart:

NSE Midcap Index Daily chart:

Waves Analysis:

NSE Midcap has shown strong performance since the start of September 2013 and has continued the same till now. In the period from the 2008 to mid 2013, this was one of the sectors which was underperforming. But from September 2013 there is change in performance cycle and more buying interest has been seen is riskier assets. In this environment it becomes important to know what is the long term trend as per Elliott wave theory for Midcap index.

As shown in Weekly chart, same as Bank Nifty, from the start of 2008 prices were moving in the triangle pattern in from of [A]-[B]-[C]-[D]-[E]. In this intermediate wave [E] completed at 6330. The rally which started in the month of September 2013 is clearly impulsive in nature and it has also taken out the high of 2008. This increases the probability that next major bull trend has started in this index.

As shown in Daily chart, intermediate wave 2 completed at 7440 and since then prices are moving in form of intermediate wave 3. Internal structure of the same suggests that minor wave v is ongoing Now on downside 10500 will act as an important support.

In short, short to medium term trend remains up for Midcap Index. Any move above 11120 will take prices towards 11500 where minor wave v = wave i.

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Trading BPCL: Applying Basic Technical Analysis!

In the current rally of Indian Markets, Oil and Gas is one of sectors which has performed well. 

Within this sector, stocks of Public sector entities has shown strong performance. Recently, stocks like ONGC, BPCL, etc. has touched life time highs. Now, question arises how to trade after such exponential rise?

We have been applying basic technical analysis on BPCL to find out the support using EMA, resistance as well as which are the good entry points for upcoming trade.

Below write-up is taken from “The Financial Waves Short Term Update” which was published in today’s morning.

BPCL Daily chart:

Wave Analysis:

BPCL an oil and gas company touched life time high at 650 levels on 6^th June. On the same dateONGC was up more than 10%, hitting all time high at 469 level. Such heavy weights participating more than 10% in single day gain is the reason why momentum on Nifty is not slowing even if the other stocks does not move up that much on comparative basis.

For stocks like BPCL, the best trading method is to use trend following system. We have described the concept in the current Nifty write-up and we can use the same method here as well. As long as the 10 days EMA is above the 20 days EMA the trend will remain positive. Only when the shorter term average crosses below longer term we will know the reversal is in place but unless that happens one should ride the trend as long as it lasts.

As shown on the daily chart, prices have been constantly forming higher highs and higher lows from the lows of 260 levels. Also the steepness of the rise has kept on increasing indicating that more and more interest is generated in the stock as it is going up.

Also an important thing to observe is that after making new highs this stock shows some pull back on downside which provides good entry levels. Going by this concept the recent high is made at 650 and any pull back towards previous peak at 590 can provide good levels to enter. The concept will work as long as we do not see lower highs and lower low formation. From level perspective 520 is going to be crucial support and our bias will be positive as long as this level is intact.

In short, the trend for BPCL remains firmly positive and short term pull back towards 590 to 595 can provide another trading opportunity. However, maintaining strict stoploss will be crucial for any trades since reversals can be fast as the rise has been exponential!

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Neowave counts on US index - DJIA

Neo wave perspective on DJIA

US markets has shown unprecedented rise from the lows of 6500 seen in March 2009. The below chart shows the Neowave countings and the Diametric pattern it has been forming.

DJIA – Weekly chart

Diametric patterns are 7 legged corrective structure. Due to complexity of this pattern the prediction prior to its occurrence is difficult to predict. However as the pattern is nearing its completion the wave structure gets very clear. The pattern has reached a matured stage but since we are talking about a trend lasting since 2009 Time and price leeway is very important.

Also look at the volumes that has constantly reduced during the entire up move which further confirms its corrective nature. Nevertheless the trend will be up unless 15500 is broken in faster time.

Diametric pattern has similarity of price and time which can be clearly seen above. On upside 16900 – 17500 will be the important levels to watch!

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