Nifty - Fractal Nature “History Repeats Itself”

Nifty - Fractal Nature “History Repeats Itself”

By Waves Strategy Advisors, For more information visit www.wavesstrategy.com To subscribe to daily equity research “The Financial Waves” write to helpdesk@wavesstrategy.com or call on +91 9920422202 / +91 22 28831358

Earlier we had published an article on 14^th March 2013 about Fractal nature which was seen on Nifty 60 mins and 10 mins chart.

On 12^th April we have witnessed similar scenario of Fractal nature on 5mins chart. Fractal nature helps us to predict what can be the plausible scenario by seeing the past movement. This means that what happens in past repeats in future. In simpler terms, the pattern which has occurred in the past and its implication will be the same in future but ratio will be different.

The following excerpt is been picked from our report “The Financial Waves” which is published daily. In this report we had shown Fractal Nature concept on 5 mins chart of Nifty.

Nifty 5 mins chart: Fractal Nature

Fractal Nature:

Indian markets have been exhibiting a similar structure on different time scales very often. The importance of Fractal nature confirms the existence of repeatable patterns on different degrees that makes the market movements predictable. The above Fractal chart is very rare since it has occurred very close to each other and on time scale of 5 mins. On 10^th April Nifty had a Gap up opening and formed a very clear zigzag down move after which a sharp rally took prices above the opening bar high. A very similar action happened yesterday when Nifty had a Gap up opening and a down zigzag pattern was again followed by sharp move on upside. It is indeed a thrilling experience to see such systematic behavior exhibited by markets on a time scale as small as 5 mins! This is also a food for thought for people who believe that freely traded markets move randomly or it can be manipulated!!!

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Nifty at crucial juncture!!!

Nifty at crucial juncture!!!

Nifty daily chart: 

Nifty 60 mins chart:

Wave Analysis:

We mentioned in previous update, “We have been very bearish at the top of 6110 and currently the evidences are shifting towards short term low to be in place soon. Nevertheless, we do acknowledge the steepness of fall on Nifty over past 2 days and so the bias remains negative. In short, as prices have broken 5580 – 5600 levels the trend remains negative for a move towards 5545…”

Nifty has come to the inflexion point and it can be seen clearly on the daily chart. The last tick price on Friday was 5545 to the point and the average close was above this level near 5553 levels. As we mentioned earlier 5545 is the level where wave 4 ended during the uptrend and normally these levels are where prices should find some support. Prices have now come to the intersection point of big blue channel and the extended support from the Gap area of wave 3. Intersection of multiple trendline usually mark important turns. This indicates that over next few days we should see some stabilization in the markets.

At the top near 6100 there were series of negative divergences and currently prices are exhibiting series of positive divergences that too on daily scale. This indicates there is loss of momentum on the downside. However, it is extremely important for prices to provide some positive confirmation. Unless that happens, our bias will continue to be negative.

From trading perspective, the current situation is a difficult scenario for positional as well as intraday traders since the stocks that participated in this downtrend has started moving sideways and the stocks that showed good strength all the while have started showing weaknesses. During such scenarios it is important to be less leveraged and have prudent risk management in place.

On 60 mins chart, we are showing a black channel that connects the 2 “x” waves at the top. If this channel is working well then we get 5500 as the level on downside for support. Also on Friday prices failed to show positive tick for the rest of the day and any attempt on upside was not sustained. This do indicates that there should be some basing formation over next few days and the trend continues to be sideways to negative.

In short, a move below Friday’s low at 5535 will take prices towards 5500 levels but prices continue to be in matured stage of downtrend!

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Hindalco: A channelized downtrend near completion!!!

By Waves Strategy Advisors, For more information visit www.wavesstrategy.com To subscribe to daily equity research “The Financial Waves” write to helpdesk@wavesstrategy.com or call on +91 9920422202 / +91 22 28831358

Hindalco is one of the classic example of a channelized move on down side. 

This article will help our readers how to initiate trades with the help of combining simple technical analysis like channels which played a significant role in determining support and resistances and Elliot wave counts in this stock.

The following excerpt is been picked from our report “The Financial Waves STU” published on5^th April 2013. Where we had shown how Hindalco respected the downward sloping channel and moved lower till 88 after making a top near 135.

Hindalco Daily chart:

Wave Analysis:

As seen in daily chart, after forming a distribution pattern near 135 levels prices failed to move above it and started moving down breaking its previous lows within the big red channel. Recently this stock faced the resistance of the upper trend line of the channel on 3^rd April and moved lower.

As per wave perspective, after completing wave C at 135 levels, prices are moving lower in double zigzag pattern and is currently in wave ….. of the second correction. This indicates that the downtrend is in later stages and should complete around … levels after which the upside correction of the entire down move from 135 to current levels can start. However for now the bias is negative as long as …… is intact on upside.

Following is more from the same report:

“An interesting observation is that in current fall Smallcap and Midcap sectors have managed to stay above the lows made on 28^th March 2013. We have been looking at many of the stocks like ADAG group – Rcap, Rcom, Rpower, Metal stocks like Tatasteel, HIndalco, Banking stocks like IDBI, ICICIBank, Capital goods like BHEL, LT. All of these stocks were the leaders on downside and started the down move even before the top was evident near 6110 on Nifty. Currently each of these stocks including NSE- Midcap index shown below has managed to stay above the previous lows. This indicates a positive divergence.”

Not only Hindalco but many other stocks and Nifty itself is at inflexion point!

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In yesterday’s morning report we mentioned that:

Bollinger Bands® levels play vital role in identifying turning points during sideways market. Currently the upper end of the band is placed at 5700 and 5720 is also an important resistance level on upside.

Happened:Nifty made a high of 5720.95 and was quoting at 5685 yesterday. It took temporary resistance exactly at level mentioned in our yesterday’s morning report of Equity.

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Nifty Elliott wave, Bollinger Bands®, RSI – Trading techniques

Nifty Elliott wave, Bollinger Bands, RSI – Trading techniques

By Waves Strategy Advisors, For more information visit www.wavesstrategy.com To subscribe to daily equity research “The Financial Waves” write to helpdesk@wavesstrategy.com or call on +91 9920422202 / +91 22 28831358

Following excerpts are picked up from the past 1 week research report of “The Financial Waves”.The below gist clearly shows how we have been combining various basic and advanced technical concepts like Elliott wave, Channels, Bollinger Bands, RSI all together to derive the path ahead in Indian markets.

Following was published on 22^nd March 2013 morning when Nifty was trading near 5650:

“Nifty made a low for the year at 5647 levels and also closed at day’s low. The trend continues to be bearish. Nifty 200 days Exponential moving average is broken and 200 days Simple Moving average is at 5614 levels. We think a move below this level will be sufficient to create strong bearish sentiment across the traders and prices will then start consolidating and later start upside correction of the entire move down from 6110 when it is least expected. …We will know when reversal happens but this time it should form a bottom reversal pattern instead of sharp reversal.”

Following was published on 28^th March 2013 morning when Nifty was trading near 5640:

“Nifty had a Gap down opening of around 20 points but prices quickly recovered and closed the Gap. Also daily chart shows a blue bar after 7 consecutive red bars. As mentioned in previous update the last time we saw 7 consecutive red bars was in November 2012 during the formation of wave 4. As shown on daily chart, prices approached near the level of 5600 and we expect 5580 – 5600 to be important levels on downside. … prices have lost considerable momentum on downside over short term and there is series of positive divergence. In short, ….…..”

Happened: Nifty made a low of 5604 on last day of expiry and bounced back making a high of 5693 on the same day.

Following is the 60 mins chart along with daily chart (not shown here) published on 28^thMarch before equity market opened:

Nifty 60 mins chart:

Happened: Nifty made a low of 5604 on last day of expiry i.e. on 28^th March 2013 and rallied towards 5700 levels. Below chart explains it all!

Nifty 60 mins chart after close on 28^th March 2013:

Following is published today morning before markets opened:

Nifty moved exactly as expected. We mentioned 2 days back that prices have breached 200 days Exponential Moving average and can breach 200 days Simple Moving average which was at 5614 then to create more bearish sentiments and should later reverse. Nifty made a low of 5604 on Friday and reversed sharply to end near day’s high of 5682 levels. Also prices came close to the level where wave c = wave a before reversing.

From medium term perspective, we think that an important top is in place at 6110 level made on 29^th January 2013. The reason being is that wave ….. took ……. days to reach near 6110 and it took only ……….. days to retrace below …… happened on 21^st March 2013. Faster retracement of previous up move suggests that the major trend has turned down.

We are using Bollinger Bands on 60 mins chart since there can be some sideways consolidation over next few days. Bollinger Bands levels play vital role in identifying turning points during sideways market. ….. As long as prices stay below this level we can expect a range bound movement between ………. Currently the upper end of the band is placed at 5700 and 5720 is also an important resistance level on upside.

Happened:Nifty made a high of 5720.95 and is currently quoting at 5685. It took temporary resistance exactly at level mentioned in morning.

Our subscribers are able to capture each and every turn in Equity markets. Increase in volatility over past few weeks provided more trading opportunities. Get access to the complete research and see not only short term view but medium term trend as well with complete wave counts and important levels that will assist you in trading! To subscribe, write to us on helpdesk@wavesstrategy.com and see yourself what is the future course of action for Indian equity markets and stocks! You can also reach us on +91 22 28831358 or +91 9920422202. For more information visit www.wavesstrategy.com