Nifty - Perspective from Elliot Wave

The markets are currently moving aimlessly. There seems to be no clear cut direction right now. Let us look from the Elliot perspective. 

1. The markets made a significant low of 22182 on April 2nd. It rallied from there to 24602 on April 21st. From there in 1 month, it has come down to a low of 23262 on May 13th.

2. If we take 22182 - 24602 as wave 1, it covered about 2420 points. Corrective targets down would be 23670, 23392 and 23105.

3. Only 23105 remains pending. Below 22700 we are headed towards new lows and above 24118 we are headed towards new highs.

4. The area 24300-24600 was a massive support zone earlier and it will not clear that very easily.

In a nutshell, the markets have taken more time to correct but not yet breached the 61.8 pc of the up move. The 3rd wave when it starts would be a powerful up move taking us to new highs.

Commodities - The ongoing boom and the next opportunity

 Commodities have entered into a secular bull run. With the help of a few charts, I will demonstrate how in the last 10 years commodities have gone multiple times.

It started with precious metals like Gold and Silver.

 

Then it extended to crude oil and metals like copper. Charts are shown below:

Now, the boom is spreading to agri commodities like rubber, cotton and so on. You can track these prices here:

https://tradingeconomics.com/commodities

The whole objective of this exercise is to identify stocks from these sectors and bet on them to make a killing from multi baggers.

What do the Elliot waves say?

Last week, we focused on RSI as a Buy or Sell signal. This week, let us look at what the Elliot waves say.

Elliot helps in taking a longer term view of the markets.

The chart is of the entire up move started from Covid low bottom of 

Wave 1 7552 - 18604= 11052 points. This took approx 19 months)

Wave 2 18604- 15191= 3413 points (31 pc correction) approx 8 months

Wave 3 15191 and ongoing since July 2022.

Wave 3 targets could be 26243, 29249 or 31760

Elliot does not put too much focus on the time lines but on price.

Implications for the longer term:

Once Wave 3 gets over at approx 29k then entire up move from 15k to 29 k will corrected. This can easily take 12 to 18 months. Post this 1 more rally of 10 12 K points and then a multi year correction.

Let us re visit this hypothesis end of May when the wave 3 will be closer to maturity.

The importance of RSI as a Buy Sell Signal

 The markets give us multiple opportunities to buy and sell. How do we know when to buy and when to sell? Let us explore that.

There is a simple technical indicator available called RSI. Readings over 70 means markets or stocks are overbought and readings below 30 are an indication of markets or stocks being oversold and a time to buy.

Let us look at a couple of charts of Nifty on daily and weekly basis to illustrate this.

On the daily timeframe in the last 3 years, there have been at least 5 sell opportunities and 3 buy opportunities.

Let us look at the weekly chart below:

 

Here also, in last 10 years, at least 4 Sell and 3 buy opportunities have come. In Weekly RSI, these are opportunities for a bigger rally and the current opportunity is a similar one.

You can explore further using the below link:

https://stockcharts.com/sc3/ui/?s=%24NIFTY

Bottomline:

RSI is a very simple and powerful technical indicator to identify Buy and Sell opportunities. This is independent of the fundamentals and purely on Technicals.