Nifty moving exactly as expected! Triangle: A phase of confusion

The below research report was published today morning and the fall was well expected. To subscribe the daily research report "The Financial Waves short term update" visit www.wavesstrategy.com

Bottom Line: Nifty formed another blue bar and continued to move in a triangle pattern. Expect sideways action to continue for a day or 2 more!

Nifty daily chart:

Announcements:

“The Financial Waves Monthly Update” is now published. The current research focuses on relative comparison of different sectors in rally started from August 2013 in Indian Equity Markets. Understanding PE Ratio, GDP Growth with Sensex. Analysis of Baltic Dry Index to know the overall health of the Economy. TVS Motor exhibits good opportunity from investment perspective and long term path of the same is explained as per Elliott wave theory. Gold/Silver Ratio to know which asset class will outperform or underperform over short to medium term. EURUSD path ahead as per Elliott wave theory.

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Nifty 60 mins chart: (as shown in morning report before markets opened)   

Wave Analysis:

In previous update we mentioned that “In short, the trend for Nifty is now sideways with no strong momentum in either side. Many time cycles are slowly turning on upside and so we will change our stand very firmly once 7800 breaks on upside!”

RBI maintained its status quo on repo and reverse repo rate as expected but cut SLR by 50 bps. As soon as the news was announced Nifty turned negative and touched intraday low of 7650 only to reverse later and closed near the high of 7750. The headline will read “RBI stand helps index to close above 7700” even though index initially turned negative after the SLR cut!

The major outperformer in yesterday’s trading session was cement stocks. The top 4 gainers were Ultratech Cement, ACC, Ambuja and Grasim. Each of these stocks was up by more than 4%. Barring yesterday these stocks had a sharp fall over past few days. It has become extremely challenging to determine the sector that will outperform during the day and it has been rotating on daily basis. Such action cannot continue for long and eventually a clear breakout will result into a few sectors leading the trend!

As shown on the short term chart, the up move touched 7750 level and closed exactly at the trendline resistance level. This up leg is probably wave d of triangle as expected and now we should see minor retracement on downside in the form of wave e which can complete in a day or 2. Trading a range bound market can be very challenging and it is advisable to wait either .... or ....... to break for a clear trend to emerge. Looking at the sideways action ongoing since July after the up move till 7808 there is high likelihood for positive breakout once wave e on downside is complete.

In short, the probable path for Nifty is as shown but as the overall trend continues to be sideways it is better to wait either ...... or ..... to break decisively! Advance decline ratio is also showing some improvement with outperformance from high beta sectors. Let us see if this continues for 2 more days which will provide vital information for direction of breakout!

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Bharti Airtel results failed to give breakout from range! Time cycles applied!

Bharti Airtel is one of stocks from the telecom sector which has shown strong gains in last few trading sessions. 

When we look at the chart it is clearly visible that inspite of good performance of Indian Equity market from August 2013 onwards, this stock has been consolidating in a big range and now arrived near the crucial resistance. The up move of last few days is also attributed to the Q1 result which has come in line with investor expectations.

Bharti Airtel Daily chart:

Elliott Waves Analysis:

As shown in Daily chart, from the start of 2013 prices have been consolidating in the range. In the last trading session stock was up by more than 5% which has brought prices again at the crucial resistance levels. The stock is now near the year long upper end of the range. A break above this range will be extremely crucial for positive trend to build up.

Time is one of the important components while trading. We have applied 205 days time cycle which is working very well on this stock. Most of the time this cycle has worked as a bottoming cycle. Even recently after the time cycle low stock has shown strong move on upside which increases the odd that atleast for short term prices have bottomed out with 350 as important support.

On the short term charts shown in actual report we have used 2 different moving averages that can help in generating buy and sell signals.

In short, for Bharti Airtel ……….

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