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Showing posts from October, 2017

Caution for Small Cap traders

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Daily Chart

Nifty Small Cap index  which is the average of 100 stocks have rallied from February 2016 till date. Many analysts are still very bullish for this index and are betting big. Looking at the daily charts many are missing small details which is shown in the chart.
From the above chart, looking at the pattern one can clearly make out that the index is forming a distribution pattern. A classical wedge pattern can be seen which is also known as ending diagonal. The post impact of the wedge pattern is devastating and small caps are favorites for short selling after dramatic rise.
Through wave perspective, the benchmark is forming an ending diagonal pattern which is a bearish sign. On the smaller time frame, prices are still in the last leg of pattern that is wave v (five). From here 100-200 points rally can be seen which would terminate the pattern and eventually it will reverse (as forecasted in the above chart). Momentum indicator RSI has already exhibited negative divergence …

Hindalco: Triple Correction nearing to an end

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Daily Chart

Hindalco and Tata Steel are one of the best performers in Nifty. However, Hindalco is now nearing to end its bull run. In the span of two years the stock surged from 70 to 270 levels which is three times and market is still positive for this stock, but it is not wise to buy at current levels.
Elliott wave/ Neo wave analysis indicates that the stock is over priced and is set to reverse in near term. Classical technical tools like channels clearly shows that prices are hovering near the resistance of the channel. By combining Wave theory and simple technical analysis one can understand the movement of the stock and plausible turning point.
As per Wave theory, the entire two year move is a channelized move, giving an indication that the structure is corrective rather than impulse. The pattern is known as triple correction pattern marked as (a-b-c-x-a-b-c-x-a-b-c). The first box is a zigzag, where wave c ends at 161.8% of wave a followed by x. Then  second correction is an ir…

Crude Oil poised for a fall

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Crude Oil (daily continuous chart)


MCX Crude Oil soared last month from 2950 till 3450 levels. However, the scenario is not looking bullish due to bearish signals forming at the top along with the negative follow up.
As per the candle stick pattern, prices formed an engulfing pattern at 3450 levels and on the following day prices continued the negative momentum. 
According to wave theory, the rise from July 2017 till the top of 3450 is corrective in nature ( 3 wave). The possibility for prices to be in a running triangle are likely and so wave e on the downside is expected. So if wave e is pending on the downside, prices will test 2900-2800 levels.
As of now, expect prices to test the level of 3150 over short term as far as the level of 3400 is intact on the upside.

Decoding Nifty ahead of RBI policy

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Nifty (Daily Chart)

Last week Nifty fell 2% from the all time high of 10179 levels. Mid caps and small caps eroded all the recent gains which eventually ended up in a pain. 
This week there is an RBI policy meet  lined up and looking at the recent momentum of the benchmark it is quite visible that the negative trend will continue. Nifty as of now have not broken any of the previous lows. Last week it made a low of 9687, thus protecting its previous low of 9685. 
However, looking at the current structure it is possible that several supports are likely to be broken. As per wave theory, after making a high of 10179, prices fell in an impulsive fashion which was completed when it made a low of 9687. The recent 3 day up move is corrective in nature and can be wave ii of wave c on the downside. 
According to Fibonacci projection prices have retraced 100% of wave a. Wave c can extend till 161.8% of wave a which can move down till 9500 levels in near term.
In short, RBI policy might introduc…