Sensex and Nifty showing divergences at pivot lows – A rare event but what next?

Sensex and Nifty showing divergences at pivot lows – A rare event but what next?

By Waves Strategy Advisors, For more information visit www.wavesstrategy.com

Indian equity market has 2 major index - Sensex and Nifty. Sensex is comprised of 30 stocks and Nifty is comprised of 50 stocks.

Both of these indices move very much in sync and also show same Elliott wave structure most often. But this time a rare event took place. On 7^th August, Nifty broke the lows made on 21^st June whereas Sensex managed to protect that low on 21^st June. Infact, even on closing basis the low was well protected by Sensex which ensued the rally on upside. Now this can go to the books ofpositive divergence between major indices.

The below plot shows Sensex & Nifty daily line chart

It is rare to see divergences between Sensex and Nifty but a positive divergence alone cannot be traded unless combined with other techniques like Elliott wave, indicators like Price ROC, Channels. Currently the fall of more than 750 points on Sensex and 230 points on Nifty is also a rare event. We have seen 230 points on Sensex very often but a close down by more than 750 points was last seen only during the bear trend of 2008 – 2009. Today’s rare event has led to a few probable scenarios which have to be evaluated before taking any trading decisions.

We will be carrying out scenario analysis in Monday’s update of “The Financial Waves short term update”. Also, we have constantly asked our subscribers to look at current market as a trading market and not an investment market as the major indices both Sensex and Nifty are not reflecting the serious capitulation seen in Indian equities!!!

For subscribing to Equity Short term update and Monthly update visit http://wavesstrategy.com/index.php/store.html

Useful for: How to trade, Relative analysis, Research on Indian Equity market

Related to: Elliott wave, Sensex, Nifty, Intermarket analysis, Trading

Nifty interim update

Interim Update Bottom Line:

Nifty has failed to show any recovery signs throughout the day. The down move of around 180 points close was previously seen in 2011. The current move has opened a number of plausible scenarios from here on. It is better to wait for clarity before concluding if today’s is just a panic selloff and bounce back is possible or start of another leg on downside has started. Avoid creating any fresh positions and long positions can keep 5480 as stop. Also it is better to be in Options rather than Futures to avoid the event risk which we have seen before on Monday’s known as Black Monday. Also do not be too stringent with that level since many important supports have already broken! Also risk reward does not warrant fresh shorts here.

In short, wait for few more days of price action to devise a trading strategy!

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http://www.wavesstrategy.com/index.php/store.html

July inflation accelerates to 5.79% ahead of expectations, What’s next for Banking stocks?

By Waves Strategy Advisors. For more information on daily research reports and view on Nifty along with other stocks visit www.wavesstrategy.com

Elliott wave on ICICI BANK: Applying Time Cycle, Price ROC and Trendline

Banking sector has been underperforming the broader market since 2 months. After steep fall, many banking stocks bounced back from the support levels. ICICI Bank is the victim in this seriousselloff and moved lower in last four weeks and currently moving near the crucial support level.

At this inflexion point, combination of advanced and simple technical tools help us to identify the next move in the stock. Below we have shown ICICI Bank weekly chart that shows the Time cycle which works brilliantly over medium term. In addition to Time Cycle, Momentum indicator Price ROC and trendline shows why ICICI Bank arrived near the crucial levels and what can be the trend form here on.  

ICICI Bank Weekly chart:

Elliott wave counts are purposely removed from above chart

Wave Analysis:

As seen above in weekly chart of ICICI bank, in the mid of June 2013 prices have breached the upward sloping blue channel and simple moving average of 200 weeks decisively. Thereafter, prices moved lower consecutive for four weeks, and tested the strong support of 860. Extendedtrendline has been working very well in this stock.  At present, prices are moving near the sametrendline and pause the downtrend. Earlier, for two times prices have found support of thetrendline and bounced back on upside.

Time cycle of 22 weeks works very well in this stock. It helps to catch the top after every 44 weeks (marked by red symbol) and bottom 22 weeks (marked by blue symbol). This means after every top formation this stock formed bottom two times in 44 weeks and bounced back on upside. At present, prices have approached the Time Cycle for second time and managed to protect the support of 860. These increase odds for the reversal in the coming trading sessions.

Inflation datamight produce only short term spike in interest sensitive sectors. But it seems Banking stocks are now near crucial support area. A positive close shrugging off the negative news is positive sign for us. But it is also important to see what will be short term important levels for timing the trades!

To know the medium term wave counts of the same stock, access to the equity research report –The Financial waves STU published on daily basis before market open. For more information visit http://wavesstrategy.com/index.php/services/170.html

Useful for: How to trade using Elliott wave and Time cycles

Related to: Elliott wave, Time Cycles, Price ROC, Channels

Ashish Kyal on Zee Business Tips on Nifty 20130813 Waves Strategy Advisors

Ashish Kyal on Zee Business Tips on Nifty 20130813 Waves Strategy Advisors. For more information on various equity research reports and advisory visit www.wavesstrategy.com

SBI declared Q1 results below market expectations but what next??

By Waves Strategy Advisors, For more information please visit www.wavesstrategy.com

Aug 13(Reuter)-SBI Q1 net falls 14% on higher provisions against bad loans and increased NPA by 37%. The stock was down by more than 3% after the results were declared. 

The short term spike can be contributed to the event but please understand that trading based on outcome of result is not the correct strategy…

Results measure the past performance of the company whereas stock prices discounts what is expected in the future. This is exactly the reason why the event only leads to short term movement but gradually the bigger trend resumes.

Technically, prices gave break out of the Wedge pattern in the start of the June itself and moved lower sharply. This is the power of simple technical analysis which helped to take the position before news arrived.

SBI daily chart

Yesterday SBI was down by almost 3% and many fundamental analyst might now come out with sell rating on the stock when it has already fallen by more than 35% from the top of 2450 in June. So a sell at current levels is not a good strategy and technical indicators are showing extreme oversold state in this stock. Timing is one of the key to make money by trading in stock market.

As we can see on Daily Chart, once SBI has given “Wedge” Pattern breakout we have seen serious sell off.  We have captured this move very well and mentioned in our daily report “TheFinanacial Waves STU” about the breakout and it moved in lines with our expectations.     

Leading momentum indicator RSI is working very well in this stock. Prices have reversed 6 times from the 25 levels. Wedge pattern target was at 1571 and SBI’s recent low was 1575. CurrentlySBI is moving at crucial levels of 1600.

As per wave perspective, prices has completed wave E at 2430 levels and achieved the wedge target on downside. The stock is in matured stage of down move. To know what is next for State Bank of India (SBI) along with crucial levels get access to the daily research report “The Financial Waves” and also know the major trend for Nifty along with other stocks.

Do not wait for outcome of an event and trade objectively. For more information visit www.wavesstrategy.com write to us at helpdesk@wavesstrategy.com or call on +91 22 28831358 / +91 9920422202