Aug 262011

The Indian currency realised its triple bottom potential at the 43.85 level as the currency moved past 46 against the USD yesterday. The chart below shows the one year daily price movements of the currency and the bottoms are marked by the red oval. The price objective of the triple bottom pattern works out to a little over 48. Given that the stock markets are oversold and a bounce may come through for Indian stocks, INR could see a short-term pull back.

Indian Rupee - Triple bottom

If the currency pair ends today above 46.1 today (a weekly closing), it would be closing above its weekly "cloud" for the first time since August 2009. This would be another bearish sign for the Rupee (I recall turning bullish on the Rupee in April 2009.)

Indian Rupee - Weekly Ichimoku charts

In 2008, when INR closed above the "cloud", the Rupee weakness lasted several months until it peaked at the level of 52.18.

If we look at the movements of the INR from an Elliott wave perspective - it does look like USD/INR is in it's early stages of its powerful wave 3. The triple bottom low of 43.85 is just a shade over the 62% fibonacci retracement level of the move from the 2008 lows to the March 2009 high. This is a very common wave relationship.

Now comes the staggering bit - if my wave labelling is correct, the potential for the Rupee over the next several months, works out to at least a little over 57 and a typical wave 3 relationship would take the rupee to a level of 65!!!!

So there it is, another asset class that is closely related to the Indian stock market's price movements, reiterating the bearish case for India.

  63 Responses to “Indian Rupee set to weaken; long term could get ugly”

  1. hello sir (whats your thought on QE3)

  2. thank you sir for your quick response

  3. “track of the trend rather than the noise of news.” this one is really important

  4. Came across your site after a friends reference. Impressed . I trade for a living and been able to do it for the last 10 years across different markets. Basically I trade the screen trends with no chart assistance and do only INTRA DAY with a major bias towards options and futures.Spent the last many months with books on technical analysis and feel now is time for testing my theories.Will technical analysis help my trading (Intra Day ) ? Can you suggest some good softwares ? I understand this may not be the right forum but please guide me!

    • Hi Vikram,

      The fact that you have been doing it for 10years means you are either doing something right for 10years or you have a very deep pocket 🙂
      A software is only a tool – and not the tool box. Some software should definitely be needed but I’m sure there is no holy grail in them. I’m not saying trading intraday using technicals will not work – but it requires a HUGE amount of emotional balance to do it right and even a small amount of outside disturbance (like what happened this morning at home, small irritants during a short travel) can contribute negatively. The number people who have made it big using intraday trading methods is far less. So you would be better off if you could step back a little bit – say something like swing trading. If intraday trading is what you want to do – the principles of TA are the same – its just that its more demanding on you.

      The books that I like are on the top on my blog – recommended reading.

      Hope this helps.
      Best regards,

  5. Gave my mail ID wrongly as it should read as

  6. My pockets are not deep 🙁 .I trade very small moves and trade large quantities ( broker is rich man ) Made a deal with my family that i will withdraw 90% of earnings from market and so stay Intra day.Could not agree more with your observation about outside disturbance. I think trading is like meditation or more like Thaichi. You loose it when you dont feel the flow. The list of books I have read in the last 8 months are long enough for me to start a library dedicated to trading. Still looking for some names of softwares that i can test for suitability as my interaction with the trading community is non existent as I trade alone.

    • Hi Vikram,

      Metastock, Amibroker one can use it universally across markets. You will need data feed for them. If you are looking at TA software only for India – you can check and

      All the best,

  7. Sirji, any view on Sbi? ..just bot at 1900 for a trading bounce..

    • Hi Rajesh,

      I was keeping a bullish structure open for SBI and if it had been correct it should not have gone below 1940. BUT IT HAS. So the longer term structure is something else. Yes oversold bounce likely but if it does not come really soon. It might be dangerous – keep it small, adhere to strict stops. Not my style to catch falling knife but it could work. STRICT stops a must.

      Good trading,

  8. Thank You.

  9. Hi sir,

    Can you guide on Aditya Birla Nuvo, I looked at the charts and entered the stock at 910, it was very good looking charts and even used to rally to daily new 52 week highs even with markets used to go down, now its Going down like no 2marow,

    Kindly guide on it sir.


    • Dear Vikas,

      There are some stocks that sometimes swim upstream but this does not seem to be one. If you look at the long term charts, the stock at its highest point post 2009 low, had just about retraced 38.2% retracement of the 2008 decline. My opinion is that, ABNuvo may go back towards 2008 lows… unless the markets put in a bottom.

      All the best,

  10. Jai,

    I am very impressed with OnMobile as a business, management team and growth potential. However can’t seem to understand the relentless fall that this stock has seen. When you get a chance, can u provide some thoughts on this please.

    Have a nice weekend.


    • Rut,

      In a bear market, people first sell and then ask questions. So do not argue with the tape. The technical structure of this stock is weak but oversold. Remember KS oils? GTL Infra? They all crashed even after being oversold and have now become penny stocks. Let the stock build a base after that you can think about buying.

      Best regards,

  11. Hi,

    Anything a good buy? In this market? Everything is a good bye…:)


  12. Hi Jai,

    After years and years of erring trades, i wish i had a good advisor. Atlast, i got to see this website of yours and i almost saw all your videos clips in cnbc and other channels. I would like to subscribe to your service.
    Please let me know what need to be done. Eagerly awaiting…


    • Hi Rang,

      Welcome to my blog. For the moment, I do not plans to provide a subscription services but if I do, I will let you know. I will post some ideas now and then and you should be able to pick up some ideas for your portfolio.


  13. Jai,

    BTW i’m in Belfast, Uk


  14. Hi Jai,

    As the market has approached Jai’s spot (4700 :)), where do you reckon it is heading to from here?
    Also JP Associates reaching 52 as you had conveyed in the channels. Any thoughts on going long here?


    • Rang,

      If you are a trader there might be some juice in JP. If you are an investor you might want to wait and confirm if the broad markets have bottomed. As a personal preference, I like cash as the best investment.


  15. Hi Jai,
    As usual, another surprising view from you, now on Indian Currency.Sir, how will this 30% to 50% appreciation of INR will result on
    1.Indian stock market 2. Gold price 3. Euro and GBP ? Awaiting ur reply,


    • Arun,

      If you do have access to charts you will notice that most of the peaks and troughs of the INR match with that of the stock markets. Though they might secondary peaks and toughs sometimes. I’m in the deflation camp so I expect every asset class to go down Gold, Euro and GBP included. Euro the break of 1.4203 might be bring in significan down sides and the equivalent for the GBP is 1.6008.

      Good trading to you,

  16. hi vikram,

    as per my exp., you can use amibroker as TA software and for Datafeed try as it’s reliable and cheap.


  17. Is the mornings jump a good opportunity to short ? And any view on how to trade the two new contracts in NSE ?

  18. Jai….
    U don’t like to keep people wondering, do you ??? 🙂
    Thanks again for a clear position.

  19. Waiting eternally for some sell signs to go short. 1st day of week and a short week at that and NO TRADES.Should have been a grand day at trade but went in looking only for a chance to sell which never came.

  20. Hi Jai,

    Thanks for your heads up on JPAssociates. Also on the subscription front, i understand you might be having restrictions. But i feel, you can really help out a lot of people who like me have almost lost their life in stock markets. 🙂 . It would be great if you could give it a thought.


  21. Hi,
    Would be the first person to enroll if you start some kind of lectures on technical analysis may be on sundays or any other day as per ur convenience..

  22. Hi Jai..

    Whats your stand now??Nifty moving higher or retest of 4720 again to make a base….Thanks

    • Hi Julie,
      If I switch to a bullish stance – it will be on the blog. Until then assume I’m still holding a bearish or nuetral with a slight bearish bias.


  23. Hi Jai,

    Been following the blog here for a while…….

    Your Nifty view has been spot on…….and your view on REC and other stocks (posted a while ago) has been spot on……congrats & great analysis…..

    Could you please review the following:

    – Charts of Gujarat Fluorochemicals….one stock which as been going upstream while the markets have been downstream

    – Nifty…….you think this pullback can last 5220-5330 or higher? Or will it succumb earlier?

    Thanks in advance,

    • Hi Ajay,

      Thank you for the kind words.

      Guj Fluoro very strong charts – however I see some early exhaustion signs. The stock is on a extended run, while there is no sell signal as on date – the stock could correct. After a substantial correction the stock seems an excellent play for the long term.

      All the best,

  24. hello
    sir any view on gold thanks in advance

  25. Hi Jai,

    I have a question to understand forex & behavior of USD better.

    Correct me if I’m wrong but from what I’ve noted, whenever there are bad news in US (financial/political/economical), USD strengthens against all currency when one would expect USD to take the beating – Why does this happen?

    Is this because other currencies smell the possibility of approaching fear from the bad news from US & fall more than USD in anticipation?

    Thanks & Regards,

    • Hi Parag,

      “Bad news” is actually a perception, so what seems bad may actually be good for the USD. All told, when an asset class does not behave as it is expected to behave, it is a warning sign of the trend having reversed or about to reverse. Let me tell you a secret, I have never read any financial news for the last 7-8 years!! When I think markets are near a peak or bottom I keep tabs of the headline, just the headlines – just to keep assimilating contrary signals 🙂

      Hope that helps.


  26. I understood stock market is microcosm of life.

    Certain events (be it terrorism, wars, policy decisions by governments, corruption) that occurs in our society continue to progress until the last dumb person in the society is able to understand the consequences of the events. By the time even the dumber can able to understand the consequences the event takes another course.

    I think it is true to USD also. One of my stock market friend said to me in my early days that biggest bull in stock market turns to bearish that it is the time stocks turns bullish and vice versa.

    News papers supposed to preach truth nothing but the truth and absolute truth. News papers speculate lot of things but to put them as headlines they are absolute sure of it. By the time they are absolute about some thing the events takes other course.

    News paper headlines are indicators for me too. But once Jai Bala said that Indicators are just Indicative of current state.

    • Hi Kishan,

      Anyone who can afford $169 can purchase the same racquet that Roger Federer (Wilson BLX Six one) or Novak Djokovic (Head youtek IG Speed) uses. But to play at their level requires something else. So is TA. Everyone can have access to the same set of tools (indicators) – but how one executes using these tools, like in the game, comes with seasoned practice 🙂

      Hope that helps.


  27. Could not agree with you more, Jai bala


  28. hello sir you made very logical and understandable point

  29. Jai,
    Hope you are well.
    Just wondering if you have any views on REC and IVRCL ? Thanks.

  30. hello
    sir how are you viewing eurchf as it became flat after snb intervention hope to see your opinion

  31. hello
    sir today read your view of nifty on moneycontrol

  32. Hi Jai, Read ur views on Moneycontrol. Am a bit confused, Please help. I have made the following interpretations:

    Wave 1 (Down-D): High of5944 on 6/4/11 to low of 5303 on 20/6/11
    Wave 2 (Up-U): End of Wave 1 to high of 5740 on 8/7/11
    Wave 3 (D): End fo Wave 2 to Low of 4720 on 26/8/11
    Wave 4 ABC correction ongoing: As per the elliott wave guidelines: Nifty shouldn’t enter the 5300 teritorry or at least not close in there.

    Big Wave 1 (D): High of 6180 on 4/1/11 to low of 5177 on 11/2/11
    Big Wave 2 (U): End of bigger 1 to high of 5944 on 6/4/11
    Big Wave 3 (D): End of bigger 2 to where ? , are we still in Wave 3. If we are, correction might go to 5350 here and we will surely fall way below 4700, so that the bigger wave 4 doesn’t enter bigger wave 1 territory

    If the ongoing correction is Bigger wave 4, again-it shouldn’t cross 5200 even convincingly

    As per your views on CNBC are we in ongoing Bigger wave 3′ Wave 4 abc correction (since u explained 5300-5330 is max we can go)?? or Bigger Wave 4 correction.

    Please help. I am just trying to learn and understand the mystic wave principle


    • Hi Rishabh,

      I will do a post on Nifty soon, its been a while 🙂 On TV I try to keep it plain english as far possible, but I do slip into technical jargon now and then. With the limited time and with aim to keep it simple, I cannot explain what degree i’m talking about.

      Why are you starting Big wave 1 at 6180? Why not at 6338 November highs? Also try to remember, Wave 3 tends to extend. So with these in mind – try the count again. It will be a good exercise and interesting EW exercise 🙂

      Hope that helped.


  33. Thanks Jai,

    Really appreciate ur quick response. Will revisit my labelling and get back with my doubts (if i can call ’em so).
    Btw, was the small wave labelling correct 🙂 ? Reply at ur convenience. Thanks again


    • Hi Rishabh,

      There are various counts possible at any point in time while adhering to the EW rules. Ultimately market tells us if we are correct or not. While your smaller count is also a way of reading the market but that is not my count. Your smaller count is also a valid one (until now – BTW the 20/June/11 low is 5195). Once you have the right beginning u will have the right ending. Sorry, its my habit – I like to drop hints, let people figure it out, rather than blurting things out.

      All the best,

  34. Thanks Jai,

    I absolutely second ur point. Spoonfeeding shouldn’t be the way. I agree.
    Thanks again


  35. And yes ….sorry for the typo…I wrote 5303 instead of 5195 on 26th June’11 🙂

  36. Oops…20th June I meant…What the hell…Aaargghhh !

    Final post for the day…

  37. Hi Jai……

    Look forward to your fresh post on Nifty……….Considering the currency levels 46.10 (INR) has been convincingly broken…..and also on the other side 1.42 (Euro), and GBP (1.6002) having crossed….in my view Nifty seems to be a reasonable short around 5150 to 5160 levels.

    Please offer your views whether there is more upside left (as per your CNBC interview), or this counter-trend rally should succumb around here……

    Thanks in advance

    • Hi Ajay,

      The most important point regd the counter-trend move I made this morning is that they can end abruptly. So nothing stops them from succumbing right away. I also said I’m not shorting yet, Ill wait for a reversal day. So it is upto an individuals preference whether to play this counter-trend or sit out. But at the moment it is up.

      Regd FX markets: more importantly the Dollar Index is about to set off on a big rally after 4-5 months of base building. A close above 76.5 on the DXY futures would be a very very important development. BTW, if you have heard my earlier views on DXY on media you would know that I have been expecting DXY to rally to 98-100 in the long term.


  38. Couldn’t help posting again.

    Jai…Read ur comments carefully…..esp that part (BTW, low was 5195 and not 5303)….looks typo could have proved fatal…Got ur point 🙂


  39. Hi Jai,

    I did the homework 🙂 as per your comments i.e. “Why are you starting Big wave 1 at 6180? Why not at 6338 November highs? Also try to remember, Wave 3 tends to extend. So with these in mind – try the count again. It will be a good exercise and interesting EW exercise”

    Finally spotted (hope I did :)) what u were trying to say – Following are the takes
    a) If my earlier count for smaller Wave 3 was correct (which i doubt now), shouldn’t touch/close 5180
    b) If my earlier count was erroneous (which is most likely), even the smaller wave 3 is not complete and the continuing trend is further smallerrrr wave 4 abc correction inside smaller Wave 3, which can go upto 5330 i.e. 5113-4720+4942 approx. 5335…Hope that is where ur number on cnbc came from
    c) As per the EW theory, the condition is more we move towards 5177 to 5350, more bleak is the near term future for NIFTY.

    Hope to get a 10/10 on my homework 🙂 Only next 2 days will tell

    Thanks Again

  40. Hi Jai,

    I have been following your posts on CNBC for a while and I am totally impressed. Would have loved to as another poster said – tie you to a chair in my home 🙂

    I am stuck in a position and need some guidance. Any views on VIPINDS (I am short when it is moving up). Of course, I have no rhyme or reason to my trading principles (mostly a swing trader).


    • Hi Vivek,

      Thanks for the comments.

      Boy! You like to stand in front of a freight train, don’t you? 🙂 Ok here is the +ve side of it. The momentum has been screaming for the last few days that it is about to exhaust. The bad news is that the stock is in a very strong uptrend. The stock is still clocking higher top and higher bottom on important time frames. While a drop may be impending, it may be tough to say if its going to be a reversal in trend. So, while the chances of a breakeven trade or a small profit is possible depending on where you sold, please understand you are taking a big risk. Just to be crytal clear – I’m not asking you to do anything, I have plainly assessed the environment of your trade.

      All the best,

  41. hello
    sir so from when are you planning to start the things which you conducted on poll

  42. Thanks for your comments Jai 🙂

  43. Jai,

    Based on ur comments on the dollar. Gold should be in trouble ?

    Also, any thoughts on Jubiliant Foodworks please


    • Yes Rut,
      Gold is in trouble, its looking like a double top(small fake move to new high). Although, the confirmation comes only at 1703

      Jubiliant looks tired might be in peaking process.
      Best regards,

  44. Thanks Jai for your kind comments & (as usual) informative feedback ………..

    Since then DXY has closed (much) above 76.50, hence, guess it should trigger the downward trend…….and as it appears, the nifty trend reversal should be in place now…..

    Think I can say on everyone’s behalf……………..desperate to have your views on Nifty, with the currencies having gone your way (more than almost)……


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