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31 JUL 2021
Dear ,
Keeping my head above the water was important this week as volatility again crushed us at the start of the week. But all is well that ends well when we hit the weekend.
This week we have started to conduct the weekend with Indiacharts sessions live for those who want to attend. This time we spent a lot of time discussing position sizing and the Episode hit 1hr 36 mins. Next time maybe we will allow 10 minutes for some live Audience questions.
That said my market view remains firm, no reason to believe otherwise. The bulls remain in control. The dollar resumes its bear market. The result season's end should discount the worst from the second wave.
This weeks updates cover key currency pairs including the USDINR and sector indices.
Enjoy
Rohit Srivastava
The Truth About the Markets
Today's Updates
After the wedge-like formation I was bending towards wave 5 up starting for the Auto index, but I have second thoughts. The market has become narrow and the NIfty reflects that. Not all sectors participating. Thus auto stocks may underperform for longer than expected. The BSE Auto index wave counts have been marked to complete a 5 wave advance inside the previous rising channel. This change means that the falling wedge is a leading diagonal in wave A of a
correction in a larger wave 2 circle. A third wave down in C may therefore be pending for the Auto stocks. Any bounce in the Auto index could be part of the B wave and may find resistance near the trendline of the X wave highs at 24177.
The BSE Capital Good index has been trading above the 20DMA despite the recent correction in the market. The index is witnessing subdivisions in Wave 5. Within Wave 5, the BSE Capital Good index is in Wave III which is further getting subdivided. So it looks like there is a long way to go for this index. In the short to medium term, the conservative approach suggests the BSE Capital Good index can possibly rise higher to 26100 where Wave III will be equal to Wave
I. The 20 DMA and 40DEMA which are currently pegged at 23063 and 22770 respectively will provide support on the way down.
The BSE Power index has been in a corrective phase and the wave count suggests it is currently in Wave 4. Within Wave 4, the index is possibly forming a falling wedge pattern and is currently in wave e. On the way down, 2590-2585 i.e. the lower end of the falling wedge pattern will be a crucial support zone to watch out for in the near term. The other scenario is that If the lower end of the falling wedge pattern is broken decisively then the correction can extend
to the previous Wave IV. Trading above the key moving averages (20DMA and 40DEMA) will be an initial confirmation of reversal in BSE Power.
BSE Healthcare index has seen a sharp decline in today's trading session but for now, it looks like a sharp correction in wave II wherein it retraced 50% of the recent five-wave and has touched the 40DEMA and the daily lower Bollinger band. Maybe the correction in the index can extend to the 61.8% retracement level i.e. 25290. Ideally, the correction in wave II should get complete around the 61.8% retracement level in the worst case, and then the BSE Healthcare
index should resume its uptrend and start wave III on the upside.
However, if the 61.8% retracement level is broken on the closing basis then the alternate scenario could be that the entire rise from March 2021 to July 2021 could be a five-wave rise, and then the correction of that up move can kick in. The reason why this scenario is possible is because the weekly momentum indicator will turn bearish if the index doesn't recover by the end of the week. So there is a chance that when the BSE healthcare index completes the
correction in wave 2, the weekly momentum indicator may have also completed its pullback cycle. That said, from the long-term perspective, the outlook still remains bullish but in the short-term, there could be some pain if the alternate scenario plays out.
USDINR faced resistance near the falling trendline from the 2020 top. It came close to touching it but turned lower. the level was at 75.17. another move to the bottom end of the triangle near 72.47 should develop. If this triangle is complete as presumed then we should break below 72.47. But that cannot always be assured. Triangles can take a long period to complete and form multiple legs like a triangle inside wave E to waste time and then the breakdown does not
happen immediately. For now, all we can say therefore is a move to 72.47 is likely. Will it go below that right away? we might get clues along the way.
The Dollar broke down from the rising wedge and that should confirm the start of wave 3 down at a larger degree of trend. This should mean that we eventually fall below 89. The immediate support level to break is at 92 below which the decline should accelerate.
EURINR nearly retraced 61.8% of its previous impulse move and is now showing signs of reversal. The daily momentum indicator has turned bullish. Once the pair closes above the 40DEMA which is currently pegged at 88.19, the bulls will be back in action. The wave counts suggest that EURINR is in wave 5 and within wave 5, wave II looks complete, and wave III should possibly start. As wave III unfolds, EURINR can rise higher towards 93.05 where wave III and wave I
will be equal. On the way down, the recent low of 87.47 will be a crucial support level to watch out for.
EUR/USD formed an ending diagonal around the medium-term trendline support. Recently, it broke out from the ending diagonal pattern and is approaching its resistance level of the 40DEMA, which is currently pegged at 1.1893. However, once it closes above the 40DEMA, it is expected to retrace 50% and 61.8% from May 2021 to July 2021 fall. 1.2011 and 1.2071 are the respective retracement levels. On the way down, the 20DMA, which is currently pegged at 1.1820 and the
recent low of 1.7520 will be the support levels to watch out for in the near term.
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Rohit Srivastava
www.indiacharts.com
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