2014 February » Cash The Chaos

What lies ahead for Bank Nifty?

Feb 092014

It is always a good idea to start from a very significant market turn to get a clear picture of how a market is poised at its current juncture. Hence, we take a look at Bank Nifty from its 2009 low.

Bank Nifty - weekly charts with Elliott Wave Labels

After a close analysis of the weekly charts of Bank Nifty from an Elliott Wave perspective, we are able to label the move from the 2009 low to the 2013 high as a completed 5 wave move. The wave principle tells us that once a 5 wave move is complete, we should look for a 3 wave corrective move against previous trend. This 3 wave move is labeled as an a b c (in circle). Most often this entire corrective wave ends near the previous fourth wave. The blue dashed line on the chart is where the previous 4th wave started and this level corresponds to 7766, which is one possible ending point for this corrective move.

Bank Nifty Daily Charts with Elliott Wave labels

Now lets take a closer look at this corrective move. Drilling down to the daily charts, we are interpreting that at this juncture only Wave a and Wave b are complete and Wave c is underway. Since wave c's are normally a five wave structure, we are interpreting the current decline to be incomplete.

If so far everything has been Greek and Latin, do not worry. What we have to do with these interpretations and wave labels is right ahead. Using the guidelines and rules of wave principle, the key point for us is that, the bounce from 9961 (Feb 4th) on the Bank Nifty is unlikely to touch 10788 as wave iv cannot overlap into wave i and is very likely to end somewhere between (10453-10756).

So what do we do with this information? Once Bank Nifty enters this price zone of 10453-10756, we look to build short positions for the bigger target of 7766 (previous wave 4) or 7200 (where circled wave A would = circled wave C)(Ideally 1/3rd at 10456, 1/3rd at 10600 and 1/3rd at 10750). One can use 10788 itself as a stop but it would be safer to use 11040 as a stop - that is if you are a futures trader. If you are an options trader, one may look to build positions in March 9000 put or the March 9500 put when the Index starts enters zone of 10450-756.

Note: All levels mentioned here are Bank Nifty spot levels and not front month or next month futures levels.

PS: Make sure you save a copy of this report as this is a pay per view report.

Legal Disclaimer: This post gives an idea of how a trader chooses low risk entry points for trading and hence what you see in this post is for educational purpose only. This is no solicitation to buy, sell or hold any securities. I’m not a registered investment advisor and I strongly urge you to consult one if you are going to act on the above idea. If you decide to take action on the above idea, you are agreeing that you take full responsibility for the profit or loss that you may sustain based on such decisions and agreeing to indemnify the author of the same. You may have seen me on TV suggesting successful trade ideas but remember trading is inherently risky and past performance is no guarantee of future outcome.

PS: This was a premium content and has now been unlocked. Trade set up invalidated on a move above 11040.

This Stock is likely to rise 60-100%, whatever be the direction of Nifty

Uncategorized 11 Responses »

Feb 022014

BF Utilities has had a stellar run from low 100's. Under the Elliott Wave model the current decline from 670 to 490 seems to be a wave iv correction. There is a good probability that the low of Friday, 490 marked the end of wave iv. As can be seen from the chart below, I'm interpreting this wave iv as a sub-wave of a large wave 3.

Hence, if we are seeing the beginning of wave v of Wave 3, we are likely to see BF Utility rise to atleast 824 (typical wave v ending point) and ideally 895, as wave iii was normal and wave v would extend. Eventually, the larger wave 5 would send this stock to north of 1100.

Hence, I would look to create go long on BFUtility, 1/3 to 2/3 of my normal trading size at current levels (530) and look for 895. In the event wave iv is still ongoing, I would look to add balance closer to 490 and 460. Once we see a cross above 620, we can be confident that the move to 895-1100 is underway.

I will email you through updates as to where to place your stop loss orders but at the moment, I do not see BF utility dropping below 460.

Disclosure: I have earlier recommended this to my clients as a multibagger around 300 levels for a target of 1300.

PS: Make sure you save a copy of this report as this is a pay per view report.

Update to post on March 22nd 2014 (via email to subscribers):

536 CMP. LIMIT UP. If you stuck to the original idea, we are currently sitting on a profit of 10%, if you added more during the decline to 431 as per email of 17th, a slighthly higher MTM profit. I suggest booking 1/3 of the qty now. When the stock crosses 605, you can add back this 1/3rd. OR stay in the trade for the rest of the ride with 2/3rd of your position - its all up to you. Remember, always play extreme defence, the profits will roll in.

Update to post on March 17th 2014 (via email to subccribers):

I just want to let you know that despite Friday's weak price action, I see
no change in the longer term price structure. Remember, the original idea
was to buy in stages at 520, 490 and 460. And the confirmation to 800-1100
was only when the stock crossed 605-20. Please re-read the original post.

Great traders always look at minimizing risk. So when the stock moved 10%
in your favour to 590+, you should have taken a bit of profit. If you did
not.... well, we can always learn. Trading is a learning school for a
lifetime.

Coming to the short term structure, we may see a drop to 420-15 before a
bottom is formed. How you manage your risk is in your hands.

Note: This was a premium digital content and has now been unlocked after the stock scaled 680 (50% up if one managed the trade as per the post and mail updates)