Post Olympics what to expect from Brazil!

Olympic Games Rio 2016 comes to an end with US, UK, China at the top rank of the table and India managing to get 2 medals – definitely a proud moment for the country.

It is said and believed that Olympics results into lot of economic activity around the country and helps in stimulating country’s economic growth led by tourism and other technological development to manage the entire event.

Let us try to look at Brazilian equity market and see if the event indeed resulted into a stand apart movement on stock market or the overall movement has continued as per the ongoing trend for many years.

Below chart of Bovespa (Brazil) was published in our monthly research report on 6^th August 2016. This clearly represents that irrespective of the event the stock market has continued to move within the blue channel and prices reversed on upside in early 2016 which coincided with lows formed in a few of the Emerging equity markets like India.

So was it really Olympics that helped Brazilian stock market in 2016? It seems more like a coincidence to me!

Figure 5: Bovespa (Brazil) weekly chart

Below is part of the research from “The Financial Waves Monthly update”

Brazil stock market index - BOVESPA  shows that after forming a top in early 2008 this index has still failed to cross above that highs and has corrected substantially. Later after topping out in late 2010, this index has continued to move in downward sloping blue channel and has now arrived near the resistance. It will be crucial to see if the same can be broken this time or prices again reverse back on downside. Brazil had not been preferred destination and the correction that started in 2008 is still ongoing.

Out of the BRIC nations it seems only Indian markets have lived upto the expectations to some extent post 2008 and rest other nations have failed miserably. This is another reason why we think the ………..

Olympic Games Rio 2016 now comes to an end. Let us see if the blue channel that has worked so well for Bovespa continues to act as resistance irrespective of the event!

“The Financial Waves short term update” and “The Financial Waves Monthly update” provides indepth research using technical analysis concepts like Elliott wave, Time cycle analysis, Indicators – RSI, Channels and lot more. Get access to these reports along with detailed Elliott wave charts and analysis on Nifty, Bank Nifty, stocks and Global markets. Visit Pricing page for subscription options or Contact US on helpdesk@wavesstrategy.com or on +91 22 28831358 / +91 9920422202 for any queries.

How to trade Nifty using RSI and Channeling techniques?

Below article highlights Trading using technical analysis methods like RSI and Channels and its application on Nifty.

It has been many weeks since Nifty is trading in a range of 8500 and 8750 levels. It was more than a month back on 13th July when Nifty crossed 8500 levels in this rally and it has failed to show any strong trending move post that. Stock specific action has continued during this period. The structure looks like an expanding pattern with wave …….. currently ongoing. This pattern is very similar to that seen during the 2014 - 2015 rally in expansion before finally topping out in March 2015.

Now look at the below chart of Nifty that shows application of multiple channels along with RSI:

Nifty 60 mins chart:

Application of Relative Strength Index (RSI): measures the strength of an index or stock with respect to itself. Many confuses this simple indicator with that of relative comparative where we measure the strength of one asset or stock with that of other. RSI basically measures the momentum of the market and helps in providing earlier warning signal in case the ongoing trend is in danger. However, a lot of novice traders simply rely on overbought and oversold state of RSI to create positions which is a blunder if there is no price confirmation. Also overbought zone is not always defined at 80 but has to be derived from the earlier extreme levels seen on the chart for that time period.

During a range bound movement RSI works very well when combined with channeling technique. In the hourly chart, we can clearly see that RSI has been reversing from the zone of 30 and from 70 - 80 zone. At the same time prices are moving within the red channel and reverses exactly from its support and resistance. For now the trend is …… and the channel and RSI resistance is now near ………… levels. It will be important to see a decisive break above this channel for extending this rally further. Failure to see upside momentum above the zone might result into retest of the lower support line again.

The above research is picked up from the “The Financial Waves short term update” our main flagship product covering Nifty, Bank Nifty and stocks on rotational basis that shows application of various technical analysis methods along with Elliott wave. Indian markets are again reaching towards crucial juncture and we are expecting a strong trending move to emerge very soon. Know the key levels of support and resistance by subscribing to this research report NOW by simply visiting Pricing page

Nifty valuation Price to Earnings Ratio using technical analysis!

How to look at fundamental parameter like Price to Earnings Ratio (PE ratio) from technical analysis perspective?

Indian Equity Markets (Nifty) has continued to move in range from last few weeks. Markets were waiting for GST to pass out from many months which is finally cleared by Rajyasabha recently.

Many were expecting sharp rally post GST clearance however markets have been moving in range with important support intact on downside. Nifty is making new highs but not able to sustain the gains and reversing towards the short term pivot support levels. This is one of the examples that trading or investing based on news or events is dangerous and hence understanding market behavior applying various parameters is must. Below we have shown chart of Nifty and Price to Earnings ratio to see the valuations at current levels.  Apart from  this, we have also shown long term, medium term chart of Nifty with applied advanced concept of technical analysis which is shown in original report “The Financial Waves Monthly Update”.

Price to Earnings ratio chart

(Part of research taken from the monthly research report)

“Understanding the valuations: We take a step forward by looking at Price to Earnings ratio with a different perspective. In Figure 4 you can see comparison of Nifty with that of Price to Earnings chart. Nifty current PE stands close to 24. Previously, in March 2015 when Nifty touched all time high of 9119 the PE ratio was exactly at this level. Now when markets are at still lower levels from there the PE has already touched 2015 highs. This clearly suggests deterioration in the Earnings over the year. Also we would look at the overbought zone of the PE chart. The major tops formed in the year 2008, 2010, 2015 showed extreme PE readings and we have again approached at the same level.

We would refrain from using PE chart to call market tops as the irrational exuberance can last longer than anyone’s expectations. Nevertheless, this does provide perspective to the overall Elliott wave counts and pattern under development.” Detailed counts shown in actual research report.

The above is the part of research only. To know the pattern under formation on Nifty with advanced Elliott wave perspective, subscribe to “The Financial Waves Monthly Update” and for more information visit Pricing Page

Nifty Fractal nature: Comparing the ongoing up move with 2014-2015 rally!

What should be the trading strategy post RBI policy announcement? It is better to look at the Fractal nature and Elliott wave pattern.

We believe that market does not move in random fashion and it forms different kind of patterns as per Elliott wave theory as well as basic technical analysis which can guide us for the upcoming trend.

There are times when markets do form similar patterns between the different time periods which is called as Fractal nature.

Below we have shown 2 charts of Nifty. First chart is of 2016 and second chart is of 2014-2015 which shows up move in form of Expanding pattern! Isn’t it surprising to see the development of similar pattern!! “The Financial Waves Monthly Update” is published which covers in-depth research on Nifty, BRIC Nations, one stock from long term, Comex Gold, Dollar index  and Mutual Fund investment.

Figure 2: Nifty daily chart

(Elliott wave counts are purposely removed from above chart and are shown in actual research report)

Figure 3:Nifty daily chart for 2014 - 2015

Nifty continued to move higher in the month of July and formed a bullish bar with low near 8287 and high near 8675. Since the low formed at 6825 we have not seen a single bearish monthly candle formation and the low of previous month have been decisively protected. Bar technique is one of the simplest and most objective way to understand the direction of the trend and the method is completely unbiased. As per this technique …………

GST and Euphoria: The much awaited GST Bill was passed in Rajya Sabha on late evening of 3^rd August. On next day index we had a gap up opening near 8600 levels but prices entered into red territory immediately. This was pointing towards the fact that the news was already discounted. Nevertheless, it seems markets are reacting a day later as there was a strong gap up opening on 5^th August and buying was seen throughout the day. ……

Comparing the current rise from 6825 with that of 2014 – 2015 rally: Look at the rise in Figure 2 and Figure 3 closely. Both the patterns show expanding behavior. Movement from the lows of 6825 matches the pattern of 2014 – 2015 very closely. Also the final leg of up move in wave e formed an Extracting triangle pattern with rise getting smaller and fall getting bigger. The recent pattern in form of wave e looks similar where each of the rise has been smaller but falls are bigger. This concept of seeing similar patterns at different time and degree is known on Fractal nature.

To get detailed outlook from medium term perspective on Indian equity markets, stocks, Commodities - Gold, Forex, Mutual Funds, BRIC nations. Subscribe to “The Financial Waves Monthly Update” by visiting Pricing Page

Is Nifty forming an Expanding Triangle Elliott wave pattern?

Elliott wave pattern: Understanding the Expanding triangle pattern. What is the wave characteristic suggesting?

Bottom Line: Nifty had a Gap up opening above previous high and reversed the trend to positive. We can expect another highs as long as 8550 is intact!

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In the last update we mentioned that, “In short, looking at sharp pullback in a few stocks and overlapping fall in Nifty with no momentum there is possibility that the downtrend has not yet started. Close above 8610 will result into positive attempt ...the movement can be sharp so one should be quick to act!"

Movement on Nifty was indeed very sharp and fast. It is therefore important to have a prudent risk level in place while trading to protect against such sharp reversals. Buying was seen across the stocks and sectors. Many of the stocks broke below its previous support levels but only to reverse later as Nifty failed to confirm by breaking below 8490 on downside.

The current leg which started from 7925 levels is still ongoing as there was no faster retracement below the level of 8490 which was last rising segment. This indicates the trend is still positive over short to medium term. Given the number of days consumed by this leg and the expanding nature of the move post wave x there is high possibility that the entire move is infact a running expanding triangle and not Diametric. Currently wave (e) of this pattern is ongoing and prices are again approaching near the upper trendline of this pattern. As the pattern is upward sloping the resistance will keep on shifting higher and it will be only on break back below 8518 there will be sign of weakness. Unless that happens one should avoid catching the top in ongoing euphoria and let the rally run its course.

Banking index has also reversed from lower levels and we are keeping a close watch if it can manage to take out the highs of 19200 this time. Auto and Cement sector showed sharp rise a day after GST rather than on the same day.

As shown on hourly chart, movement post wave x is also in expanding fashion. This results into prices taking out the high without momentum and also the fall only results into reversal in few days. Expanding triangle patterns are most challenging for traders as crucial levels get whipsawed without any trending move. As per this pattern we should now take out the previous high of 8711 and prices can move towards 8730 - 8750 resistance zone. Strong close above this zone is required to extend the rally further.

In short, trend over short term is positive as long as recent lows near 8518 is protected. Avoid catching a top in current euphoric rise unless there is faster retracement below the mentioned level. We are closely observing if momentum builds up as prices approaches the trendline resistance level yet again which has been protected for many weeks now!