SEBI's new norm & its impact expected on Nifty 50

Hello Readers,

Nifty has posted a bearish engulfing. This coincides with the big announcement by SEBI to establish minimum investment requirements in each market cap category- large-cap, mid-cap and small-cap. This decision, while disruptive of the natural market forces of demand and supply is a gift for the small-cap investors. You might have noticed several small-cap indices have given a marvellous run-up today, refer to the snapshot below-

This is however not good for Nifty50 as it comprises of the largest 50 stocks in the market. 

Now, if you have Rs.10000 (100%), in the following denominations:

Rs. 2500 in a promise coupon from your Mother that she will pay you this money on so-and-so date (debt) (25%)

Rs. 6000 in 6 notes of 1000 denomination notes (large caps) (60%)

Rs. 1000 in 10 notes of Rs. 100 (mid cap) (10%)

Rs. 500 in 100 coins of Rs.5 (5%)

But SEBI is now asking you to hold this same Rs. 10000 in such a way that you have at least 25% each of large-cap, mid-cap and small-cap. 

So now, you will have to ensure that you have 

1) At least Rs. 2500 in Rs. 5 denominations, that is 5 times of Rs. 500. That's a minimum 5x rally in the small caps

2) At least Rs. 2500 in Rs. 100 denominations, up from Rs. 1000, that is a 1.5x rally. 

So this means you have 50% already allocated to mid and small caps. Now initially you were holding 60% portfolio in large caps. 60+50=110- not a realistic scenario. So you will have to unload your Large caps to accommodate the mid and small caps.  

This, when applied to the stock market, will mean a boo-boo for Nifty 50. The large-cap index is already displaying three undeniable signs of weakness as elaborated in the analysis below.

  

This move by SEBI will prove to be a big promoter for the Indian economy in general and I believe is very much in line with the Central Government's mandate of promoting small businesses as observed in the budget 2020. 

Please leave your thoughts in the comment section below. This will help me improve my content. 

Thanks for reading :)

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Nifty 50 - Ready for an upswing!

Hello Readers!

Nifty update:

Nifty has corrected steeply over the past weeks. In the last Nifty update, the macro reasons behind the steep fall in Nifty were stated. In the following days I also posted about the bearish engulfing pattern which had emerged on Nifty's Daily chart and indicated further weakness with an infograph on my facebook page.

Nifty went on to breach the 10200 low exactly as per the analysis stated and closed near 10150 level today. However, the bear trend has been going on for a while now and few evidence on the charts plus an inter-market factor indicates that bears might want to take a step back (temporarily only) for now and let the falling Nifty take a break from all the chaos.

Evidences indication pullback on Nifty's chart:

1. Appearance of the Spinning Top: The candle stick pattern formed on the daily chart of Nifty is a reversal pattern. The spinning top  is a pattern which indicates indecision and represents struggle between the opposing forces (bulls and bears) which determine the trading prices. 

The image below highlights the spinning top and explains the significance of the pattern. The occurrence of such indecisive pattern close to importance support levels is often an indication of bear trend reversal, even if its temporarily.

2. Trendline support: Trendlines offer strong support/resistance zones. Nifty has reached one such strong support level which I believe may help the index take a breather before resuming the corrective movement against the primary trend. The resistance by virtue of another trendline lies at the level of around 11100. 

3. RSI Positive Divergence:  RSI is my favorite indicator. It is a leading indicator and has on several instances given superb signals of trend reversals. Nifty's daily chart has shown one such positive divergence. A positive divergence occurs when the indicator does not forge a new low as compared to the price. This divergence is a hint towards underlying strength. Again, the occurence of the positive divergence near a trendline and close to the oversold zone increases its potency. 

The above three factors are purely technical related. An inter-market factor which also indicates that a reversal in Nifty is due is the weakness in Crude oil price. It has fallen over 5% on 23rd Oct that is today. Crude oil price and stock market are inversely related. Rising crude oil price was a major factor behind the falling stock market price over the past few months. The weakness therefore is expected to provide some strength to the index. 

The above 4 factors are in my opinion sufficient to keep the index from sinking further in the immediate future. The rest will unfold with time, till then, adios!

The stock market dilemma- What is happening with Nifty 50?

Hello Readers!

It has been a while since the previous post on the index  and a lot has changed since then. Nifty has taken a deep dive and is just coming up for a breath of fresh air.

Let's first answer why Nifty corrected so much?

Is it because of Sri Narendra Modi, our Prime Minister?
Is it because of weak economic policies?
OR is it because of some twisted reason related to Pakistan?

The answer is none of the above!

The index is correcting simply because of global fears and impact of trade war which has interfered with the balance in global economy and its impact is visible via movement in 3 primary assets: Gold, Currency and Oil.

Intermarket analysis

The picture is mostly self explanatory.

Nifty is rallying currently because oil dropped nearly 3% yesterday, but that does not mean everything is back to normal already.

I am not analysing Nifty's moves in this post, that is for another post but for now I would like to emphasize that the correction is not over because the main ingredients (Gold, Rupee and Crude Oil) that determine the direction for Nifty, are still sour.

Nifty has not bottomed, It is only the calm before the storm continues

The volatility is evident from the price action. There is fear and anxiety and retail participants are losing self control in this market.

Correction will continue, even if Nifty takes some rest. And this rest will probably not exceed over 11155. It is best for the retailers to sit on their pile of money and wait the storm out rather than dumping it in the troubled ocean that Nifty is right now.

That's all. Stay tuned to my blog for a detailed analysis of the Elliott Wave counts on the index.

I would really appreciate comments in the section below. Do share the link to this blog with your friends, other analysts and on social media.

Adios!

Fun Fact: I have added links which can take you to interesting articles. If you're a hungry reader, then you will surely have fun!

Balrampur Chini: Bottom fishing (A study of range shift in RSI)

Hello friends!

I am back with a post after a long period of dormancy. I was never off practising TA but wasn't writing about it for various reasons (like laziness). But now it's time to dust our sleeves and get back to business.

I have spotted a compelling chart which really got me out of the dormant state and urged me to post about it!

That stock is Balrampur Chini!

Please refer to the chart below:

Balrampurchini Daily Chart captured on 24.08.2018

I am a huge fan of the momentum indicator - Relative Strength Index (RSI) and it was RSI's range shift phenomenon which has drawn my attention to the chart of Balrampur Chini.

In the above chart, you will notice arrows marking the beginning of major rallies. These arrows are actually highlighting the range shift in RSI - the phenomenon wherein RSI breaches the overbought zone of 60 to indicate higher momentum in the stock at relative price lows and at the end of corrections. This change in stock participant's momentum- where the buying momentum supersedes the selling momentum, is captured by RSI beautifully.

On the chart we can see that out of the past 4 instances, only one instance has been a failure where the range shift 's indication of a rally failed. Some might argue that the sample size of the observations is too less to conclude the range shift phenomenon to be any good in the above case. If you're one of those people then I advise you check out the older data of the stock and you will see the answer for yourself. There are more hits than misses.

The misses (indicated by the red arrow on the chart) have very distinct characteristic to themselves. Everytime the RSI has breached the level 60 soon after breaching the oversold level of 30 deeply, has lead to a failed rally. Basically, range shift works both ways. If you have RSI racing past 60 after a sluggish move where it held its nose above 30, then that gives a good indication of an impending rally, but the same move after a deep dive below the level of 30 just indicates shortness of breath and a bad (failed) rally.

To add to the above observation, the stock has also successfully made a higher high and a higher low which indicates uptrend. It is currently resting at the kissing point of the 35 and 50EMA. A crossover of the 50EMA above the 35EMA would make me more comfortable with this upmove.

If you look very closely, there has been alot of volume activity near the bottom of the chart just before the higher highs and higher lows came into the picture (literally). This for me is an indication of accumulation by big cats (the guys who knows the whats and whens before everyone else).

The stock also resisted the 100EMA (blue line) is the last rally so naturally moving above this level would be a confirmation of the rally and trend change.

I am expecting a 100% rally in this super cyclical stock post confirmation. Also, a breach of the previous low (59.70) is an exit for me.

As a disclaimer, this isn't a stock recommendation but a mere observation of a great phenomenon unfolding on the chart.
Another disclaimer: I am long on Balrampur Chini.
A warning: Anyone investing in Balrampur Chini based on this article is doing so at their own risk. Please be responsible.

The above observation is purely technical. Anyone with a fundamental insight on Balrampur Chini is invited to share the same, we can put up a collaborated article ( no pay for that :p).
I will myself try to come out with some fundamental insights (only if I get the time, no promises). You can reach me at kchamaria1993@gmail.com for the analysis of other stocks (NSE, NYSE, LSE as long as there is a chart), commodities or currencies, I will try my best to respond.

Until next time, Adios! :D

Footnote : The article was published before rally witnessed in Balrampur Chini today. It close 5% above yesterday's closing. 

Nifty poised to take a step Lower

There is a lot of energy in the stock market. Everyone seems to be losing their minds because of the continued pumping of money from the FIIs . We all understand that the current rally in the index is backed by sentiments and not by economic improvements and this makes the rally unsustainable. Now, I am in no way suggesting that the bull run is over. I am very bullish for the long term, however in the intermediate term, I believe there is a possibility of a set back, or a 'correction'.

Let's take a look at the 1 hour chart of Nifty. 

Nifty 50 1 hour chart, showing weakness

In the above chart two trendlines are visible (I would'nt call it a channel since the lines are not parallel) . 
In the last couple of days, we see that the trendlines have been violated. The resistance trendline was violated in the sense that the index turned lower without touching it, and the support trendline got violated by an outright breakdown .


Lets take a closer look in the chart below.

There are a few things that demand our attention  in this chart:

1.  Nifty failed to touch the resistance trendline on 8th Aug, and turned lower irrespective on 9th Aug.

1.  Nifty breached the support trendline on 10th Aug just before closing , however on 11 th Aug it bounced back higher from the 200 SMA closing at the trendline, trapping the bears.

1. On 12th Aug, when Nifty opened, a strong surge took Nifty higher on account of evident short covering after which a lull fell on the index and the rest of the day was spent in consolidation. 

1. RSI , our momentum indicator, has picked up the sentiments correctly in my opinion as it maintained itself below the level of 60 signalling weakness. 

1. The very last candle on the chart is a red candle with a small upper wick, and this hints to us that the market was weak as it closed and had been open, weakness would probably have continued.  

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Thank you for taking out the time to read this post. 

It will be fair to conclude that given the movement witnessed on Friday (12th Aug) the bulls are not very enthusiastic but the bears too are rather timid given the burns they witnessed on 10th and 11th August. 

The major reason behind the surge in Nifty was, I believe, the result of the banking major, SBIN which was announced at 11 am  on Friday. 

Talking about the way ahead, I do not want to sound overly confident by stating outright that Nifty will turn lower as I have my own inhibitions but the RSI indicators does show weakness in the prices and the rest remains for time to validate. 


You can contact me via email at kchamaria1993@gmail.com for feedback, suggestion, criticism or advise on anything Technical Analysis!

Kavita Chamaria

Blog temporarily discontinued

Dear Reader,

This blog page has been dis-continued temporarily . However that does not mean I've stopped writing.

Kindly visit the website  http://www.elearnmarkets.com/blog/market/  and  http://www.elearnmarkets.com/blog/technical-analysis/  for various article which I have put together on different chart patterns, stocks, currencies etc, and a daily and weekly Market Wrap which states what moved the maket all day and all week.

I request you to please read what I write and criticise it to the best of your ability, let me know it all in the comment section or just email me at kchamaria1993@gmail.com :D

NIFTY headed for deeper water!

"MARKET KYA LAG RAHA HAI?"--- This is the most repeated question of the year 2015 following the 9116.95 high on 04th March 2015. 

Below is an attempt to answer this question.

The market is clearly in a correction(for the better) . It is being said the Indian Economy will take over China in leading Global growth. I believe its true. But does that imply that the Indian market indices are invincible? Nope!

What is begun, has to end. The correction which is underway will see completion.

Below is a detailed Elliot Analysis of Nifty.

The Primary bull run that started from September 2013(~5200) ended on March 2015(~9100) registered a rise of nearly 4000 points. This rise encapsulated the proper 5 waves structure as laid out by Sir R.N.Elliot. 

NIFTY SPOT Daily Chart , Dated- 28th August 2015. Elliot count on Nifty.

I am pinning on the 7200 level because of the following reasons:

      1.7200 level is the level of wave ii 3 [3] as highlighted by the ellipse on the chart below.

      2. A ~50% Fibonacci of the entire primary wave gives us the level of 7150 .

      3. There is always a Fibonacci relation between the lengths of Wave A and Wave C. Wave A was exactly 1180 points (9120-7940) . I'm expecting Wave C be 1460 points long. That is 1180 x 123.60%(a Fibonacci level) = 1458.48. So from the level of 8655(previous high), 8655-1460=7195.

NIFTY SPOT, Daily Chart, dated: 28/08/2015. Showing Elliot breakup. 

   

Such clustering of evidence around 7200 add weight-age to the level. 

Below is a breakup of the corrective Wave A-B-C reflecting Nifty at its current level of resistance which is exactly 61.8% of the the Wave 1 so far into the primary Wave C.  

NIFTY SPOT 4H Chart dated- 28/08/2015. Fibbonacci Levels and Elliot Wave analysis

Few levels taken for the analysis maybe off by 10-20pnts. But in my understanding they do not hamper the reliability of the Elliot and Fibonacci tools. It would be very interesting to note than ever since Nifty has hit the 9000 high, the RSI indicator has evidently undergone a range shift. Early the indicator would cross the 70 mark and stay shy of 40, but at 9000, the indicator did not pass above 60 and also broke the 40 mark to take support at 30 several times. 

These elements help in judging the pulse of the market and are crucial for analysis.

Thank you reading. 

Please feel free to comment on the analysis.

Anyone seeking detailed analysis on any security , preferably stock/currency/commodity, may email me their requirements at kchamaria1993@gmail.com. I'll try my best to help you with my analysis.