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

Nifty: Path ahead using Time cycles with Elliott waves and understanding maturity of trend!

Nifty has moved exactly as expected as per path shown on 3^rd November 2014. 

Prices have been moving in sideways correction instead of downside and now retesting the crucial levels. The forecasts shown below are done using the advanced concepts of Technical analysis: Time Cycles and Elliott wave theory on 3^rd November 2014 – the very next day when index managed to move up by nearly 150 points in single day.

It requires strong belief in techniques that has stood the test of time to predict a correction after strong positive sentiments and gain of 150 points i.e. nearly 1.8% gain in single day.

Now let us go back in time and see the below chart with Channels, Time cycles and Elliott wave counts:

Anticipated on 3^rd November 2014 morning research report:

 Happened as of today:

On 3^rd November 2014we mentioned that “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 thePrice projections. At times when prices are moving in complex corrections projecting price with high degree of accuracy is a challenge.

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. 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!”

Happened: Looking at the above chart, one might think that the movement was not on the downside but sideways. Please understand that sideways action is also a part of correction and can be more dangerous. Trading within the sideways action can result into not only financial but emotional loss as well. It makes the trading environment boring and eats up the patience for someone who entered after the rise of 150 points just to keep watching index for sideways action for nearly 8 days in a row. The high made by Nifty within this range is at 8415. This is exactly at the zone we have mentioned in start of November.

Path ahead:

However, by simply knowing beforehand that a correction is plausible whether sideways or downside one can save lot of Time andemotional energy along with possible financial loss.

The above chart does not require much thought process for someone who understands even the basic concept of Channels and trendlines.

To know why it is time to be alert and prudent to be back from short vacation during correction subscribe to “The Financial Waves short term update” along with the long term forecasts in ourMonthly update. Offer: http://www.wavesstrategy.com/payment/ the short term update for 3 months and get the Monthly research report FREE. It is time to act as we do not reach such junctures very often!!!

Budget and Sensex! What are you expecting?

The below research is published in "The Financial Waves Monthly update" By Waves Strategy Advisors. For subscription options visit www.wavesstrategy.com 

Indian markets are riding high on expectation of Budget this time, which is believed to reduce to focus on reducing fiscal deficit, boosting growth and economic revival.

This time there are high expectations set on Budget day but it can act as short term ….. until July end and ………. major correction kicks in till April 2015 which will be a multiyear low and the unprecedented rise will continue towards 61000 mentioned in last year report!!!

Below chart shows movement on Sensex on the Budget day since 2000. We have marked numbers on the chart indicating the budget day and same has been explained in the table. Through this research we tried to find out the trend before and after the budget and percentage movement on the same day.

Sensex chart:

S. No.	DATE	RULING PARTY	BUDGET DAY HIGH-LOW MOVEMENT (%)	TREND ONE WEEK BEFORE BUDGET	TREND ONE WEEK AFTER BUDGET
1	01/06/1998		-4.78	Negative	Negative
2	27/02/1999	NDA	5.75	Negative	Positive
3	29/02/2000		-8.8	Negative	Negative
4	28/02/2001		5	Negative	Negative
5	28/02/2002		-5.19	Positive	Negative
6	28/02/2003		-1.41	Positive	Negative
7	03/02/2004 (IB)	NDA	-2.88	Negative	Positive
8	08/07/2004	CONGRESS	-3.90	Positive	Positive
9	28/02/2005		2.6	Positive	Positive
10	28/02/2006		2.10	Positive	Positive
11	28/02/2007		-3.7	Negative	Negative
12	29/02/2008		-2.9	Positive	Negative
13	16/02/2009 (IB)	CONGRESS	-3.70	Positive	Negative
14	06/07/2009	CONGRESS	-7.53	Positive	Negative
15	20/02/2010		1.45	Positive	Positive
16	28/02/2011		3.25	Negative	Positive
17	16/03/2012		-2.5	Positive to Sideways	Negative
18	28/02/2013		-2.70	Negative	Positive
19	17/02/2014 (IB)	CONGRESS	0.75	Positive	Positive

Here we have shown movement on Sensex on the Budget day since 2000. We have marked numbers on the chart indicating the budget day and same has been explained in the table. Through this research we tried to find out the trend before and after the budget and percentage movement on the same day. These are the following observation:

1)            As seen on the table in 2000 Sensex was negative by more than 8.5% which is the lowest and on the flip side positive by 5.75% in 1999 which is the highest since 1998.

2)            The average movement on Sensex from 2000 is 3.70% therefore in upcoming Budget on 10th July 2014 we can see a movement of anywhere between 2.5% to 4% between highs and lows.

3)            Whenever the new government is formed in five years we have witnessed that the budget day has been very volatile and 4% to 7% movement has been seen and out of 6 observations post Election the Budget day has been negative on 4 occasions and with only minor positive close of 0.75% in recent IB.

4)            Eleven times trend has reversed after the budget for atleast a week. Out of these eleven times: from negative to positive – four times and from positive to negative – seven times. Hence there is higher probability that this time market might correct on downside for a week atleast.

5)            Sensex has closed negative 12 times on budget day and on the positive side only 7 times.

In the end we can conclude that budget day would be very volatile with movement anywhere between 2.5% to 4%. The probability as per above statistics is favoring more towards negative close on B- Day than positive. Traders should follow strict risk management strategies accordingly.

In addition to above research we have also published a detailed analysis on 

- Relationship of Nasdaq100 and CNX IT

- Price action of Dow Jones, Sensex and Crude during the War & Crisis

- SAIL Long Term Outlook

- USDINR price forecasts

To get access to the complete research subscribe to “The Financial Waves Monthly update” along with short term research report for better timing the entries and exit and knowing the trend right from short, medium to long term forecasts till 2020! Visit http://www.wavesstrategy.com/index.php/store.html