Indian Industrial Production, Surprise everyone going below zero

            The Indian Industrial Production (IIP) came at minus 4.2 %; the expectation was at 2.4% just near the previous release of 2.5%. It was not alone to blow the economy. Other data were also equally negative which will hit the growth of the Indian economy. Forex Reserves fell to US 314.66 billion from the previous release of US 316.31 billion, drop by US 1.65 billion. The holding of the reserve is reduced due to the heavy balance of payment adjustments. Manufacturing output came at negative 7.6% from the previous release of 2.5%, shows the manufacturing growth in the economy is falling sharply. Consumer price index came at 4.38% from the previous release of 5.52% just below the expectation of 4.63%; showing the consumer are looking further drop in the price of consumer goods in near future. Low impact data which came along were Cumulative Industrial Production and Deposit Growth both came lower then expectation, whereas Bank Loan growth has increase marginally. 

Road Ahead - Golbal Recession - NIFTY target 6600 immidiately support @ 6350, Below 6350 crash landing

Nifty from the chart we have seen an uptrend in market from March 2009 onwards, where market has taken support after the 2008 crash. In year December 2008 nifty was trading around 6300, which was all time high and suddenly market cracked due to global recession. But market recovered from the lows immediately in 2009 and again tested the higher level of 6345 same high from seen in 2008, but there was a rise in index alone, stocks prices did not recover much. Price movement from 2525 point A to 6345 point B was 3820 points. Market respected the resistance level of 6345 and retraced to point C at 4535 level, nearing the 50% retracement of 4430 deviating by 100 points. By the year end 2013 December resistance level of 4345 was breached and tested the all time high of 8665.

            If we calculate as per the theory of ABC price movement, point D of 8665 exactly comes at 161.8% expansion of the rally from point A to Point B, calculating from point C. To be precise 161.8% comes to 8700 level and nifty reverted just before breaching this level.  Now considering the fact market has rallied one way from in past three months from 7750 to recent top of 8660 there has do be a correction in market. We expect nifty should correct minimum by 50% of the rally from point C at 4535 to point D at 8665 which comes to 6600 level. This correction till 6600 will bring to the strong support of 6350 which was once considered as strong resistance. If in worst case if nifty breach and sustain its trading below 6350 on weekly basis we might look at a falling knife in market with double edged, where the panic selling will come and nifty will drift to 4500 which was point C support and next extreme case support of 3400 level.

There are many reasons for this huge correction in the financial market which is supported by following fundamentals.

·         The VIX – the ‘Volatility Index’ – has dropped to 9.3 on November 25^th, the same reading last seen in 2007 where the world financial markets were ridding for the fall.

o   This is what happened after the VIX hit a low of 10.02 in February 2007. Stock markets were soaring at the time, but then got clobbered by the credit crisis and all the disastrous events that followed.

o   The VIX went on to hit an all-time high of 79.13 in October 2008, when governments were scrambling to bail out bust banks and fears were rife of a total meltdown in the world financial system.

·         Prices of Crude oil are expected to test USD 55 per barrel to USD 38 per barrel, which is supported by the excess supply from the OPEC country that is not ready to reduce the output. US have started its own Shell oil production reducing the dependability from the gulf countries. Globally the demand for crude oil is reducing from many countries as they are entering in the recession phase.

·         Countries like Japan and Europe have already entered in the recession phase, but from today’s announcement Chinas government said lower rated bonds can no longer be used as collateral, Shanghai Composite Index headed for biggest loss since August 2009

·         Federal Reserve Bank have infused huge amount of funds in to the economy in the form of quantitative easing program, but was not able to change the intrest rate which is still at all time low. Although the Unemployment and Labor market are showing sigh of improvement, inflation is still at the lower level. Dollar index is trading positive in last 6 months, is well above 89 but is failing to hold the higher level where 90 is expected resistance level.  Till the time we do not see any improvement in Inflation figure, sustainability of the growth will be doubt and if this happens Dollar will also fall with global growth slowdown.

·         Dow Jones is continuously trading higher from the bottom of 2009, with a small correction was seen in mid 2011. There was not such a huge change in fundamentals, but the funds which came in form of quantitative easing went to the stock market. And once the bubble which is expected to bust might bring the greater panic then what we have seen in 2008. If this happen then we might not look at sharp reversal what we have seen in 2009, but we will be consolidating at the lower level fighting for the growth.

Presently we are the ‘Peak’ of the economic cycle, which is followed by ‘Recession’ where many countries have entered into the phase where they are facing recession phase. Then there comes the ‘Trough’ where sustain near the trough will be tough time for global recovery. Sooner the recovery from trough less is the chances of entering in to the war type situation. 

NIFTY Top Out for life time,,

One Pager Report on NIFTY forming Rising Wedge Pattern

India 50 (Nifty50) Sell @ 7980 Stop @ 8100 TGT 7200 – 6700 - 6070   

                India 50 (Nifty 50) since 2014 May has been trading in the side way to upside moving channel and making higher high and with five consecutive high and rising support have formed the Pattern formation of Rising Wedge pattern. This pattern is still in the formation stage and only break below 7700 will confirm the down trend. Though once can take a pre decisive move and enter at current price which is near 8000 and also at the rising trend line where it has always reverted from. Suppose this pattern holds true and market trade below 7700 in September by 2^nd week then we might look at the profit booking which might drag soon the market to minimum of 6660 as first support and then the level 1 target of 6070 on lower side. Height of the wedge from 7620 to 6660 is 960 points and break below 7700 will bring to support of 6740 as first support, Level I which I have taken a rise from 5990 to 7620, difference comes to 1630 points and break below 7700 target comes to 6070 as second support. Level II which I have taken from 5105 to the top of 7620 where the difference comes to 2515 points and break below 7700 bring to the target of 5185 which will be at the strongest support where value buying might comes in picture for enter in long term buying with support of 5100 was seen in August 2013.

1.        Prior Trend: In order to qualify as a reversal pattern, there must be a prior trend to reverse. The rising wedge usually forms over a 3-6 month period and can mark an intermediate or long-term trend reversal. Sometimes the current trend is totally contained within the rising wedge; other times the pattern will form after an extended advance.

2.        Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be higher than the previous high. Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be higher than the previous low.

3.        Contraction: The upper resistance line and lower support line converge as the pattern matures. The advances from the reaction lows (lower support line) become shorter and shorter, which makes the rallies unconvincing. This creates an upper resistance line that fails to keep pace with the slope of the lower support line and indicates a supply overhang as prices increase.

4.        Support Break: Bearish confirmation of the pattern does not come until the support line is broken in a convincing fashion. It is sometimes prudent to wait for a break of the previous reaction low. Once support is broken, there can sometimes be a reaction rally to test the newfound resistance level. Volume: Ideally, volume will decline as prices rise and the wedge evolves. An expansion of volume on the support line break can be taken as bearish confirmation.

One Pager Report on DE30 (DAX indices) Positional target 8500 - 8150

DE30 (DAX) Sell 9535 @ 94 Stop @ 9770 TGT 9200 – 8900 – 8500   

             

            DE30 is showing formation of AB = CD where point C has retraced by 61.8% of AB. Where point A at 10043 to point B at 8903 w, retraced by 61.8% at 9600 and is showing the sign of reversal. If we consider (1:1) movement then point D must teste minimum of 8500 level where the 100% expansion theory will be completed. If we consider 127% of AB then we may get the level of 8150 on lower side. If the theory holds true and fails to trade beyond 71.6% which comes to 9720 then we can wait for lower target as per the theory.

The Principle is that AB is the impulsive wave in the market, BC is the retracement of AB and will usually be a 61.8% (.618) retracement of AB but should not exceed a 78.6% (.718) retracement of AB. If it exceeds 78.6% te AB = BC pattern is negated. CD will then be the next wave and be equal to AB (1:1) or be a 1.27 or 1.618 extension of AB. So when trading, you look for the chart patterns which have performed the ABC formation and plot exit point D which will be equal to AB of be a 1.27 or 1.618 extension of AB.

What Is an ABCD Pattern?

Reflects the common, rhythmic style in which the market moves. A visual, geometric price/time pattern comprised of three consecutive price swings, or trends—it looks like a lightning bolt on price chart.       A leading indicator that helps determine approximately where and when to enter and exit a trade. Why Is the ABCD Pattern Important?

                Helps identify trading opportunities in any market (forex, stocks, futures, etc.), on any time frame (intraday, swing, position) and in any market condition (bullish, bearish, or range-bound markets). All other patterns are based on (include) the ABCD pattern. Highest-probability trade entry is at completion of the pattern (point D). Helps to determine the risk/reward prior to placing a trade. Convergence of several patterns—within the same time frame, or across multiple time frames--provides a stronger trade signal. 

WTI OIL one pager forming Symmetrical Triangle pattern, Near bottom support area

WTI OIL is showing sign of Symmetrical Triangle Pattern Formation where its near the lower support level at point ‘e’ around the level of 92.55$ and once this support of 92.55$ - 92$ holds reversal is expected in WTI Oil where on higher side falling trend line resistance is seen at 104$ where as crossover above the same will confirm the breakout of the pattern. If we take breakout at 104$, Expected target as the height of the triangle comes to 130$ on higher side. We expect small profit booking on the way to test the target of 130$. 

Bank nifty Rising Wedge and trend reversal ..

Rising wedge formation : height 15900 - 13860 = 2040 points , expected breakdown @ 14950 and after the breakdown the next target down side will be 12910 level.