Be a Responsible Bull

In our previous post (January 2012) about Volumes in Indian markets following Elliott Wave Pattern we had mentioned about the Volumes in Indian markets Correcting in a Zig Zag fashion (in figure yellow dotted line). But as the beauty of the Elliot wave pattern lies in the flexibility, the patterns in Volumes started adapting to the new situations built up in India due to the overwhelming majority to a Single party in the recent elections and started to correct in a fashion called as Flat correction (in figure Green dotted line) instead of Zig Zag correction as previously mentioned. As I said above the beauty of Elliot Wave patterns lies in its flexibility this (current correction pattern) might as well change due to some solid positive external factor which might change this pattern to a Impulse Wave rather a corrective (flat correction) as mentioned before. But for time being it looks like this is going to be a flat correction in Volumes which makes the market more or less a moderately bull for next 2 qtrs and activity might pick up drastically after that. The volumes in this moderately bull market will not dry down but will remain in a range bound fashion chasing good quality stocks on a selective basis.

The Simple rule in the market should be to select good quality Large caps, Mid caps which are performing on a consistence basis and go long in it. Avoid stocks with controversies, with huge debt burden in their balance sheets and stocks having other fundamental issues. The mantra should be – Be a Responsible Bull. Don’t be an Aggressive bull or a Cautious bull or an Aggressive bear or a Cautious bear.

How to be the 1% who Realise their Original Dreams Only 1% of you may go on to fulfil your aspiration of becoming a CEO of a large company or leading a successful startup! 90% of you are not likely to get anywhere close to your aspirations and ambitions even 25 years from now!”  I was speaking to a packed hall of bright youngsters from top B-schools. A pall of silence descended on the room.  “You worked very hard to get here. However, do you still have that passion, drive, dreams, determination and a huge appetite to learn what brought you here? Or did you dump it to focus instead on shortcuts like how to “network” and changed your life goals to simply land the best job in campus?”  I could see some nods in the room. In my experience, only 1% of us are able to realise our original dreams despite the rest being just as capable. To get to your dreams you need to learn to create magic “outside the boundaries of logic and reason” and not be trapped within. So how does one do that? Let me share with you three ideas that have worked for me.  The first is to embrace your uniqueness.  Think about it. What is that one thing which you have and which no one else in the world has? I believe the answer is, “you”. So why try hard to ape others and be like someone else? In that attitude alone we lose our uniqueness and our ability to create magic.  There was once a boy who was born without a right arm. When he grew up he learnt karate and soon wanted to compete in a tournament. His master said he could and taught the boy one single move.  The boy won the first round of the tournament and then the next round and the one after that until he found himself winning the entire tournament. Baffled, he asked his master how he did it.  The master smiled and told the boy there is only one defence against the move the boy learned and that defence involves grabbing the attacker by the right arm!  There are 6 billion other humans on this planet. However, there is only one you. There is a reason God made you unique, find it, leverage it and you will win every time.  The second is to look beyond distractions. Life is a box of unknown events that appear at random times – some good and some not so good. I call them ‘distractions’. It’s your ability to stay focused through these distractions, fixated on your longterm goal that will help you see beyond trappings like salary, bonus, cars or not-sogood ones like the wall of failure, rejection, unfair assessment etc. Remember a magician systematically creates magic by distracting his audience, yet remaining focused on the end game, undistracted. Unless you train yourself to look beyond and outside the distraction box, how will you even stand a chance of getting to your goals?  The third is having a deep-rooted conviction in your goals.Once there were two trees in a village. One next to a river was green and beautiful. The second stood in an arid patch of land. It was thin and had few leaves and people ignored it. One night there was a storm and the villagers woke up assuming the tree next to the river would have survived and the other tree would have died. But the reverse happened. The reason was simple. The tree next to the river used to get water easily. Therefore, its roots were shallow and were not able to withstand the storm.  The other tree had deep roots and survived. If you do not have a deep-rooted conviction, won’t you be blown away by the first advent of adversity? So ask yourself again, what is it that you really stand for? The list of what you can do to be in that 1% is long and it all starts with you – actually your mind.  The more you have it in your control, the higher your chances of fulfilling your dreams and ambitions.  (The writer is founder, Sampark Foundation and vice-chairman, HCL Technologies) VINEET NAYAR Source: The Economic Times

Evidences for Market moving upto 6384

The Target on the Nifty (6060) has come as we had  predicted on our previous analysis on 21st September 2012. Now we are back with more Evidences of Nifty moving up to 6384 in near term (may be by February end). The Analysis goes as below.

Let's First look at the Elliott Wave patterns formed on the Nifty Chart. As you can see in the chart and like we observed it in our last post We are still not sure if the upmove started from 4531 is a Corrective ABC or Impulse 5 Waves. But one thing we can tell is that there is one 5 Wave pattern Emerging as shown in the figure below. 

And as per Elliott wave calculations this pattern will have a minimum movement upto 6384 because in this pattern the 5 Sub waves (1,2,3,4,5) of the Wave (3) are dividing the Wave (3) into 61.8% and 38.2% as shown. This division comes because sub wave 5 of Wave (3) is extending itself from its normal movement. But there is one wave calculation which says this move can end near 6234 (Sub Wave 5 being equal to 1.618 times Sub Wave 1) but that looks unlikely with our further evidences shown in our next charts below.

Lets have a look at more evidences which support the above mentioned move in the nifty.

1) If you can see in the below figure the Nifty is following a 11 week peaking cycle from the time it started moving up. The peaks you can see in the Long term KST at the bottom of the chart. 3rd cycle is running now and it is in it's 7th week and the peaking is yet to happen

2) As you can see the Long term KST is moving upward in a channel and the next move pending in that channel is towards the upper limit of the channel.

3) When you look at the volume in the chart you can see that volume is increasing as the cycle is peaking and decreasing while market is correcting repeatedly and this time it should be no different and the peaking of this cycle is still pending and may start any day from now till 11 weeks are completed.

4) Also if you see the last chart where Long term KST of USDINR is moving in a diagonal channel and its next move is towards the Lower Limit which means Appreciation of INR and Depreciation of USD which intern means more funds flowing into India which shows the positive sentiment on Rupee for the short term.

So looking at all these above Technical Evidences it looks like further up move towards the above target of 6384 is expected Nifty in very near term.

Looking at Trading Point of View based on above analysis

Traders must place their long bets on Stocks which have upsides pending as per Elliott Wave and Fibonacci Calculations. Some of the stocks to go long are given below with their potential Targets in near term.

Scrip                                          Potential Targets

SBIN                                             2824

Axis Bank                                      1508

Tatasteel                                         454

Bharti Airtel                                    430

REC Ltd                                        289

Tribute to Elliott Wave Theory

Just as i met someone in the street (D-street)
who could do things very very straight

Says he believe me or leave me
but you cant forget to remember me
As i unleash patterns everytime
have you no choice but come back to me

Just as i met someone in the street (D-street)
who could do things very very straight

Says he impulse waves 5 times
and corrective waves 3 times
Follow his Length and time, everytime
you give once, get back many times.

Just as i met someone in the street (D-street)
who could do things very very straight

Gives he advice of some sort
like asking me to go short
Dont bother all others being long
see markets obeying him all along

Just as i met someone in the street (D-street)
who could do things very very straight

Is he the one who guides this jungle
making me everyday richer & stronger
He Seems to be the gods own design
giving my trading THE GOLDEN SHINE

                                                                                                              By Raghs

Is it a Confusion Or Conclusion on D-Street?? We say it isn’t both!!

As the euphoria about the reforms unleashing on the one side and anxiety about the stability of the government after TMC pulled out support lingering on the other side the markets are flush with liquidity injected due the QE3 by the US federal reserve and making higher highs and higher lows showing the sign of the bullishness. Is it really a bullish sentiment playing out the mood or is it something else lets take stock of it as below.

As you can see from the below diagram the markets have been drawing down from the top it made on Nov 2010 in a ZigZag fashion making Wave (A), Wave (B) and Wave (C). Now after it made bottom with Wave (C) it has pulled back from there to make a high of 5630 and from there started correcting again upto 4770. 

Now the question here is that, 

Is the move from bottom of Wave (C) upto 5630 is Wave 1 and following correction upto 4770 is Wave 2 and now the current upside which is nothing but a leading diagonal formation (as shown in the fig) could be a first subwave of the Larger Wave 3?

Or

Is it a upward correction of move from Nov top to upto 4531 in which the up move from 4531 to upto 5630 could be a Wave A and the following correction upto 4770 could be Wave B and then now the upward move which is a diagonal can be a ending diagonal of Wave C?

As traders what we have to look at it as in any case the diagonal movement either its sub wave 1 of Larger Wave 3 or the Wave C of upward correction, is near its ending as per Elliott wave rules. The maximum upside can be expected upto 5800 before the correction is expeted to levels near to 5450-5420

Another interesting fact is that if any day the nifty closes above 5630, it can move upto 6060 in the short to medium term. But this move can come only after the correction that we have predicted in the previous Para. 

 So if nifty closes above 5630 any day then the market for short term becomes buy on dips for an upside up to 6060. Or if it doesn’t close above 5630 and corrects from there we have to wait for the 5450-5420 levels to break down to go short in the nifty.

In Both of the above scenarios traders have to wait with patience to get the correct entry either on the long side or the short side.

Markets getting to the Peak but not yet Peaked out!!

For last more than one year its been a sea saw between peaking out and bottoming out in Indian Markets. And this time its no different. As you can see markets have bounced back from the recent lows and now waiting to peak out. The million dollar question is which level it might peak out. Here we show you major 3 indicators which help you in judging the peak.

Firstly if you see the below figure which gives you maximum extent of movement that is possible in terms of Elliott Wave Theory which market seems to be following very studiously. The maximum level that market can go in this pull back is 5335 which is the peak of the 1st wave of the downward impulse move which started in Oct 2010. And this current pull back is the 4th wave which in EWT should not retrace the 1st wave which we mentioned above.

The Second Evidence for market not yet peaking out is shown in fig below. Here we are dissecting this 4th wave shown above to understand the movement little more accurately. Here the pattern that market is making in this move in terms of Elliott's 5 waves is shown. In this figure below we can see that the 3rd wave of the relatively highest degree in this 5 wave structure is still formulating itself by getting divided into smaller and smaller sub waves. Which means unless this 3rd wave is completed we will not be in a position to say that market is peaked out (Assuming that 5th wave will be a truncated one as market is near its probable peak).

The last but not the least is an indicator shown below which gives the FII net flow data (daily basis) in both equity and F&O segments. Interestingly if you notice FII net inflow has peaked every time in last 3 instances at the peak of the market which has not happened still in the current scenario. One more interesting thing about the FII inflow is that net inflow in F&O segment has peaked 5-7 days earlier than the peaking of the FII equity net inflow. As you can see in the figure the peaking of the net inflow has not happened in both the segments yet we might have to wait for some more days before the market could peak out.

Overall the strategy for time being should be to wait for the signals of market peaking out as explained above. We will be updating our strategy for Feb month as soon as we get these above signals.

Beauty of Elliott Wave Theory !!

As being an admirer of R N Elliott's phenomenal discovery of the, almost accurate, underlying structure of any freely traded market I was curious to know whether the same theory is being applied in the fluctuation of the volumes in Indian Markets from the time the data is available and I found the following (shown in fig below)

The graph above is self explanatory as you can see the move in volumes of Indian Stock markets (NSE) from 1995 to 2011 is been perfectly conforming with Elliott's Wave Theory in terms of most of its guidelines and rules.

Also if we apply Fibonacci ratio analysis to this graph the overall up move which we have seen in volumes from 1995 to 2009 is been correcting since and the correction will continue till the time the whole up move retraces 61.8% on the downside. As you can see in the chart the numbers written in red color are the volume figures at bottom, top and 61.8% retracement juncture. 

So before the volume could pick up in the markets it has to dry down to 61.8% retracement level (shown with red line). So this is also a signal for us to know that the markets have bottomed out.