Nifty and Budget! What is next?

The below research is picked up from the morning report "The Financial Waves short term update" for more details visit http://www.wavesstrategy.com/index.php/store.html 

Bottom Line: Nifty indeed kept the traders on pressure cooker till closing. Finally even the best of the Budgets failed to produce desired impact on index!

Nifty daily chart:

Announcements:

“The Financial Waves Monthly Update” is now published. The current research focuses on Sensex from medium to long term perspective and why we think that major rally to start before mid of next year 2015. We have analyzed how Sensex has reacted 1 week prior and 1 week post Budget.The amazing relationship between Nasdaq100 and CNX IT. Price action of Dow Jones , Sensex and Crude during War and Crisis. Steel Authority of India Limited (SAIL) exhibits good opportunity from investment perspective and long term path. USDINR analysis based on Elliott wave theory, Fibonacci retracement and RSI.

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Nifty 60 mins chart:  

 Wave Analysis:

In previous update we mentioned that “Today is the Budget day and volatility will be high. Closing will be crucial and looking at the overall pattern and counts we are expecting a downside move today of anywhere near 3% looks possible! In short, the trend continues to be negative and if we are looking at the pattern correctly the selloff will intensify from here. Use 7720 as crucial stop level for short positions and preferably on closing basis due to event.”

The movement of Indian equity markets indeed kept all the traders on pressure cooker whether on long or short side until closing. Nifty traded in narrow range till 11.30 and market reacted negatively during 1^st part of the Budget. It was later after the announcement of Direct and Indirect taxes and road map shown to cut down Fiscal deficit that Nifty showed a strong move from the lows of 7480 to the high of 7730. The twist in the trend happened exactly at crucial levels near 7500 on downside and near 7720 levels on upside. Bank Nifty as expected was most sensitive to the budgetary speech but closed negative by more than half a percent. The only sector that sustained with strong gains was real estate stocks after the REITs announcement. In totality, it seems the event produced strong spikes on intraday basis but Nifty finally resumed its short term downtrend. Also as expected the difference between high and low has been nearly 3.30% which we very clearly mentioned in our detailed update on Budget in current Monthly research report published on 3^rd July. 

A close observation shows that yesterday’s movement was very similar to that of the Budget day movement of 16^th March 2012 where the top was formed 2 days back and there was a strong spike on upside but Nifty finally closed in red. On next day the selling pressure continued. If we are linking the current pattern correctly to that of Budget day movement in March 2012 then the downtrend should continue today as well.

As shown on daily chart, Nifty formed an outside bar which does not change the short term trend and keep it negative as long as close above the previous day’s high is not seen. Volatility can continue even today and we expect 7500 to eventually fail to provide any support. Trading intraday on events like this can be both financially and mentally exhausting if caught on the wrong side of the trend exactly at the wrong time. We therefore prefer using closing levels on events day.

It seems that an important top is in place at 7800 level and this level should remain intact atleast till 25^th July or end of the month. Prices are now moving down in the form of a-b-c correction and wave b got completed near yesterday’s high at 7730. As long as the short term red channel shown on 60 mins chart is intact the trend will continue on downside. The probable target once 7500 breaks is towards 7250 levels. 

Infosys result due today will result into further volatility during the day. The stock showed down move and made a low exactly on channel support near 3250. Break below this level can result into sharp move towards 3050 whereas any move back above high of 3380 will keep the positive outlook intact. The negative bar created yesterday has raised some doubts on the internal strength of this stock and on the validity of Head & Shoulder pattern. Nevertheless, break of 3380 will be strongly positive. But for now it is better to wait for either of the levels to break for clarity!

In short, the roller coaster ride of yesterday produced intraday swings of nearly 545 points - enough to raise pressure of even the most conservative trader!!! For Nifty, there is no change in our outlook that the trend remains negative and existing shorts can now use 7700 level as stoploss. Break of 7500 will be crucial and selling pressure will intensify taking index towards 7250 support zone! If our wedge assumption is correct we should see intensity in selling pressure after some consolidation.Also if a strong positive Budget cannot drive the uptrend I am not sure what will result into upside reversal now! 

Attend the 2 days training workshop that will apply not only Elliott wave but other important techniques and Time cycles to capture the major turning points. Timing the turns is equally important along with Price projections and we will be discussing the current scenario and future path right from short term to long term forecasts till 2020 on Sensex, Gold, USDINR and much more!

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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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Upcoming Event in Mumbai on 12-13 July 2014

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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.

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 

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The charges for the Training is Rs. 10000 + 12.36% Service tax =Rs.11240/- (Till 31st January 2014). 

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