Market Analysis With Megh Mody

We all know the importance of Technical Analysis and how it works in today’s market. Technical tools like channels, Fibonacci retracements and oscillators like RSI, MACD etc do give us signals for when to buy and sell. Combining simple technicals along with advance technicals like Elliott wave and Gann Analysis always keep us one step ahead of the market movement. Advance technical eradicate subjectivity and helps to take proper trading decisions. Today we shall see some important concepts of Elliott Wave theory. In 1920 R.N. Elliott invented this theory and named Elliott Wave. He observed that there are thirteen patterns or waves that recur in market price data and are repetitive in form, but are not necessarily repetitive in amplitude or time. We will now discuss some important concepts of Elliott wave theory R. N Elliott has discovered 2 types of waves in the market 1. Motive or Impulse wave 2. Corrective Wave 1. Motive or Impulse waves Elliott said that

W.D Gann a legendary trader and an analyst has invented many master charts such as square of 144, hexagon, square of 52 etc, amongst these one was square of 9. We have discussed earlier about its origin, here we will be discussing the other concepts of this master chart. Square of 9 can be used in many ways and has different approach towards individual stocks, commodities and currenc y. We will first see how this master chart was constructed by William. D. Gann. Gann in early 1920’s visited India and there he saw a square within a circle. Thereafter he went to Egypt and saw pyramids based on these observations he constructed Square of 9. The chart has a square which is fit within a circle and there are numbers placed on the face of the square and outside the circle. At the center of the square we will place a starting number and then we will rotate with one increment at a time. One full rotation completes at number 9, and that explains the name of the chart. The numbers which are

Ambuja Cements is one of the leaders in cement sector but from past 3 months the stock has disappointed many investors and traders. When the stock was trading at 210 levels in the month of July 2013 many investors thought that the stock will cross its previous high of 223 but it failed to do so and the reason was Holcim taking over Ambuja Cement. But does news drive the stock prices? We will see with the help of advance technical tool known as Gann Fan. Gann Fan was one of the inventions of William. D. Gann. He always believed that when a stock, commodity or currency price favors a particular angle then it will test angle above and vice-versa. Daily Chart: Ambuja Cement. Analysis In the late 2008 Ambuja Cement has started moving in a positive direction. The entire move from late 2008 to 2012, prices moved by forming higher high and higher low. Now in early month of this year prices started to move in a corrective manner. We have placed Gann Fan from la

Yesterday we had published an article on Bharti Airtel by saying that its last leg on upside is over and has started next move on down side which can move down till 300. We were very accurate in capturing this move as Bharti Airtel today made a low of 301 in the first hour of trade. Daily Chart of Bharti Airtel on 19 th August 2013 Daily Chart Bharti Airtel Anticipated Happened on 20 th August 2013 Note: Daily chart not updated on 20 th August 2013 We had mentioned in our previous article, that the stock has broken many supports and has completed a distribution pattern on smaller time frame which can lead prices lower till 300 levels.

Bharti Airtel was one of the out performers in Tele Com sector like R Com, Tata Com etc. Looking at the current structure we can say that it has completed its last leg on upside and has started its down move. This is only possible with the help of advance technicals like Elliott wave counts and Fibonacci Retracement to provide support and resistance levels. Bharti Airtel Daily Chart Analysis From the above daily chart we can observe that prices from August 2012 were impulsive in nature and made a top in early January 2013 at 370. Thereafter prices are moving in a corrective manner. Impulsive move is very easy to identify as compared to corrections. We have placed Elliott wave counts to identify the next move of Bharti Airtel. The stock completed its last leg at 354 levels and has started its down move. The stock was facing the resistance of 78.6 % retracement of the previous down move (370-266) even simple technicals like Adx has given fresh sell signal on

Elliott wave Principle and Gann analysis both are different and unique. Thus both technical theories work very well in today’s market. Here we will not see the practical application of the theories but the difference between them 1.     Elliott Wave Principle says that in an impulsive wave there should be 5 waves in which 3 waves decide the market direction and 2 waves are just the reaction. Whereas Gann analysis says that in order to know the trend of the market on the upside there should always be 3 section more than 3 section can be utilized as an opportunity to create short positions. From the above chart we can come to a conclusion that more than 3 section will suggests that the trend of the market is not going to sustain and there are high chances for the market to reverse. This is one of way to catch a top or the bottom.

Nifty Mid Cap is moving in a down trend by forming a lower high and a lower low formation. On 31 st of July 2013 prices broke its crucial support of 1802 and moved lower till 1722 as on 2 nd August 2013. This clearly suggests that prices are negatively poised and has the tendency to move lower. To justify our view we have used advance technical tools to find out the desired support and resistance of this index. We have used Gann Fann and have placed it on the top made on 9 th January 2013 from there on prices have moved below 1x1 line which is a very crucial to identify the support and resistance. Currently prices are below this line which clearly suggests that it is facing the resistance of this line. As far as prices move below this our favored view for this particular index is negative and can move lower till 1550 levels. Nifty Mid Cap Daily Chart We will not be publishing the method to forecast in this article