Bank Nifty Elliott wave counts and trend ahead!

Bank Nifty is one of the indexes which has underperformed Nifty since May 2013.

If we just compare the charts of Nifty and Bank Nifty, then Nifty is consolidating between the range of 5900 and 6350 since November 2013, whereas Bank nifty is clearly moving in lower highs lower lows pattern from the start of December 2013.Before 2 months, prices were trading at 12250 levels , however, recently it has retraced 61.8% of prior up move, made a low near 10000 levels and bounced back on upside. Now, the question arises that, whether underperformance of Bank nifty will continue or more upside is possible from the current level?

We have been applying Elliott wave theory along with basic technical analysis to know the next short to medium term trend ahead.

Below we have shown part of research taken from “The Financial Waves STU” which was published in today’s morning report.

Bank Nifty Daily chart: 

Bank Nifty 60 mins chart:

           Wave Analysis:

As seen above in daily chart, after completing wave B near 12200 have moved lower, breached the wedge pattern on downside and retraced exactly 61.8% of the prior up move from 8400 to 12200. 61.8% is an important retracement level. Also momentum indicator RSI has turned from the support of 30. This indicates the positivity over short term before it resumes the downtrend.

As shown in 60 mins chart, in the start of February 2014 prices found support near lower end of the channel and bounced back on upside. In past 6 trading sessions we have observed an up move in major index Nifty. Bank Nifty is currently moving along with Nifty and has been outperforming during this period. Thus there is high probability of prices to break the channel on upside and continue the uptrend.

As per wave theory, sharp move on upside suggested the end of simple correction a-b-c and currently prices are moving higher in the form of wave x. Wave x has retraced 50% of the prior wave c. A move above 10600 will break the channel and open further positive possibilities. This scenario remains valid as long as 10100 is intact on downside.

In short, move above previous high of 10600 will take prices higher towards 10900/11000 where 76.4% retracement is placed. However, move below 10300 will result into range bound movement.

The above research is picked up from "The Financial Waves short term update" by Waves Strategy Advisors. This research report has view and outlook on Nifty with 3 stocks short to medium term. For subscription option please visit http://www.wavesstrategy.com/index.php/store.html or any other details Contact at helpdesk@wavesstrategy.com or on +91 22 28831358 / +91 9920422202

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Why Elliott wave should be combined with other technical analysis methods?

The below research is by Waves Strategy Advisors. For research subscription on daily basis visit http://wavesstrategy.com/index.php/store.html

Elliott wave classifies the movement of market either as impulsive or corrective. 

Impulsive moves are simple 5 wave structure with 3 basic rules to be followed whereas corrective waves have many varieties. Trading Indian equity market has been a challenge due to the fact that most of the time prices are either moving in sideways action or forming complex corrective structure. A Gap down opening of 60 points yesterday and then again a Gap up opening today clearly indicates a complex formation is underway. During such times it is imperative to keep exposure less and in direction of minor trend which seems to be up as of now.

The below chart is picked up from “The Financial Waves short term update” a daily research report that covers Nifty and 3 different stocks which assists in trading from short term perspective.

Bottom Line: Yesterday’s bar further confirms that Nifty up move is corrective in nature.

Nifty 60 mins chart:

Wave Analysis:In previous update we mentioned that “In short, it will be important to see if Nifty can manage to cross above yesterday’s high near 6160 for positivity to continue today else range bound movement can be expected. Any Gap down opening if not filled during the day will be cautious sign. Fresh longs should be avoided given the fact that prices have already formed 4 consecutive blue bars as of yesterday.”

Nifty continued to maintain its status quo of not forming more than 4 to 5 blue bars. This simply shows that there are certain patterns and structure we have to observe on charts which market follows time and again. Nifty had a Gap down opening of nearly 25 points and prices managed to sustain the Gap throughout the day. Interestingly, in the entire up move from 5930 to current levels we have not observed a single Gap up opening which is sustained. Such movements are signs of corrective structure rather than impulsive.

As shown on daily chart, since September 2013 onwards prices are moving within the range of 5900 to 6350. Even this time prices made a low near 5930 and reversed back upside for a probable move towards 6200 levels. Trading within a range bound market can be challenging as each of the legs are corrective and not impulsive. Corrective patterns can be complex and tricky to identify beforehand. So it is important to combine wave theory along with other techniques likeCycles, RSI, Bar technique, Moving average crossovers.

From medium term perspective, ………… if prices can move above ……. to resume the uptrend or breaks below ………. for minor negative confirmation.

In short, ……………

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Nifty Elliott wave counts and short term trend!

The following research is picked up from "The Financial Waves short term update". It is a daily research report by Waves Strategy Advisors. For subscription options visit  http://www.wavesstrategy.com/index.php/store.html

Bottom Line: Nifty has managed to protect the weekly low made at 5933. Breakout from the range is important for clear direction.

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that “Due to interim Budget today, volatility can be high and closing will be important. Failure to close above 6100 or below 5980 will continue the sideways action.”

Nifty had a minor Gap up opening yesterday and prices stayed between 6100 and 6040 level throughout the day. There was minor spike on downside during the interim budgetary session that sounded more of an election campaign on what UPA government did over past 10 years than anything else. Index managed to close near the day’s high but still below 6105 level by closing.

As shown on daily chart, it is unclear as of now if the low made on 4^th February near 5935 is where double corrective pattern in form of wave w ended or it completed near 5984 in form of truncation on Friday. For latter counts shown on above 60 mins chart, prices have to break above 6105 levels before today End of day. Failure to move above this level will open up a few probable scenarios like triangle or complex x wave is ongoing.

Prices have moved between a narrow range for 9 days now. It is due for a breakout either above 6100 or below 5950. Close above or below these levels will result into short term trending direction. Looking at the chart patterns of stocks it seems that majority of them are completing 5^th wave and showing positive divergence after arriving at crucial levels.

As shown on 60 mins chart, prices are now near the upper end of the Bollinger Bands and failure to cross above 6105 today can result into subdued movement within the mentioned range. Such environment is challenging more from intraday trading perspective since it is unclear whether to bet on breakout or to follow the strategy of selling near resistance and buying near supports when markets are already in a range for 9 extended days after 8 days of down move.

In short, expect a breakout soon from this range. Close above 6105 can take prices towards 6200 – 6240 whereas any move below 5940 will result into resumption of downtrend. Wait for breakout for next trending opportunity!

The above was published in morning research report "The Financial Waves short term update" To see Nifty along with stocks short to medium term forecast visit http://www.wavesstrategy.com/index.php/store.html

Nifty Relative strength index (RSI) – A different technical analysis perspective!

The below research is published in today's morning research report "The Financial Waves  by Waves Strategy Advisors. For various subscription options visit http://www.wavesstrategy.com/index.php/store.html 

Relative Strength Index (RSI) is one of the most widely followed technical indicators. Many traders use this in order to understand if the market is in overbought or oversold state and if there is positive or negative divergence.

We take a step ahead in looking at this simple indicator in a very different way and how it helps to understand the trend of the market.

The following excerpt is picked up from “The Financial Waves short term update” our daily research report on Nifty along with 3 different stocks. Read further to know more how we are applying RSI in addition to Time cycles, Channels and Elliott wave counts.

Bottom Line: Nifty broke above the 3 days range but only to re-enter later. The action continues to be subdued!

Nifty 60 mins chart:

Other studies and Elliott wave counts are purposely removed from above chart.

Wave Analysis:

In previous update we mentioned that, “In short, move above 6095 or below 6020 followed by 5950 is important for short term direction. Unless that happens, sideways action will only make traders more complacent exactly before big moves.”

Different way to look at RSI:The daily RSI has again bounced back from 30 levels. This level has worked very well since past 3 years. RSI reading of 22 was last seen during the downtrend of 2008 and then later in 2011. We are keeping a close tab on RSI reading and if the resumption of downtrend can lead RSI towards this level of 22 which will indicate a bigger degree correction on downside

The same concept of RSI when applied to 60 mins chart gives important information. The reading of 20 is seen in the recent selloff. This reading on RSI was observed only during the downtrend when Nifty touched the level of 5118 in August 2013. This further confirms that the up move from5118 to 6355 is complete and the current market will be in sell on rallies mode as long as RSI 80 level is intact on upside. This is a very different way of looking at a very common technical indicator.

In short, we continue to think the medium term trend as down on Nifty but minor positive move cannot be ruled out. Move above 6100 can take prices towards 6140 levels whereas move back below 6050 can result into sideways action to continue. Break of ………. will confirm resumption of medium term trend on downside.

We do not rely on one single indicator for direction but combine it with Time cycle and this time as well prices have turned exactly at the cycle hour. It is at times a thrilling experience to see Cycle theory working to the point. Further along with Elliott wave counts it provides a very strong trading setup environment. Subscribe to “The Financial Waves short term update”by visiting the Pricing Page or Contact US for more details.