Why There Won’t Be A V- Shape Recovery This Time
Recovery after the falls of COVID, Demonetization and Kargill wars were V shaped - but don’t expect the same this time .
Those were black swan events - not discounted by the market in advance - very sudden events .So market recovered very fast as soon as it realized the extent of damage by those events .
But this time - the fall is not out of sudden events - every future news is being discounted now - fall has been slow ( Oct onwards ) - so recovery would also be slow .
We can see a clear distribution pattern from October itself as well as FIIs were selling for last full year .
(In hindsight, that was a clear sign for this ongoing fall as currencies were falling all around the globe but India and few other countries were holding . But FIIs understood that and they cound see that we can no longer save our currency in wake of going against the global trend. They sold Indian and other emerging markets equities even before the real currency-depreciation started)
Bear -markets generally happen to be of 12-18 months duration in India - 6 months already gone - let’s hope we recover in 1st half of next year ( unless US crashes very badly ) And yes, let’s also keep a watch on our currency, more it falls ,more bad it would be for equities.
These all views are just opinions - forecasting is not so easy.
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is this a watch list to enter stage 2
This is trying to make a base in Stage 1.
And that is a healthly sign as stocks that make a base to move further they happen to give good upmoves as weak hands either get frustrated during base formation due to time or price fluctuations.
A clear S2 stage yet to start.
But keep in mind , sometime S 1 ase can also result in breakdown if the overall market crashes.
Hello Sirji, thanks for this details it helps. I also think that this time or in near term (2-3 months) Fed will not intervene to boost (liquidity) the equity mkt. Which also reflect on the charts too… that one or two more legs are pending and which will drag down the SPX to 100MEMA (3K around) and nasdaq to 9K approx resp. It will be invalid if Fed intervene in between.
In market we heard always history repeats on chart and then later on the ground likewise found that the chart pattern getting print this time is same as it was there in 2008 crash and that time also as of my knowledge Fed entered bit late and then recovery starts(i was not active in mkt in 2008). Not sure this time also the history might repeats. If so then again kind of recession is on the way, as you rightly mentioned in the other factors in your comment. Which may be the reasons.
In all this in 2008 also gold was out performed well for next 18-24 months and this time also gold has BO and retest is in WIP, so pls shed some light on this with your experience. TIA
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Elliot wave theory is a very very old theory (decades old?). And practitioners of the theory have not covered themselves in glory. I had read about Robert Prechter’s doomsday predictions few years ago and that was exactly from where markets turned. So for a person like me its difficult to bellieve in the theory blindly. I have followed a lot of guys and once subscribed to a guy who advised based on EW and found most of them to be wanting.
So although I prefer to take the help of technicals, I prefer to follow stuff which I have seen work more often than not and whose methods I find easy to apply in real time markets.
I used to read a lot of Vivek Patil’s write ups back when he used to write in icicidirect, but he was writing too many complicated things and always had an alternative scenario lined up. I myself tried to read, learn and practice EW but did not find it too easy to use. Maybe the fault is with me. But personally speaking, I find using the techno funda approach works the best.
If at all EW is to be useful, it has to be able to predict important turning points closer to top rather than predict doomsday scenarios when markets are already in teh doldrums. And these days with the spread of information being very quick and responses to them even quicker, I find that the cycles have turned very short and markets tend to go up and down very quickly.
I have nothing against EW, and often admire guys who simplify and put it up for others, (like you do), but prefer to take the this stuff with a pinch of salt.
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Counter question: If every likely future news/event is already being discounted now then does that not mean that we are nearing the bottom (unless more negative surprises are on the horizon that we are not aware of at this stage)?
While their is fear, but tons of liquidity is still sloshing around and will likely be around for some time.
P.S: Really appreciate you putting out your analysis in easy to understand format for everyone. Keep up the great work!!
I won’t agree that all future news/event have been discounted.
There’s still hope. People are still buying the dips.
Young kids are stil running their training programs on breakouts/pullbacks trading. SIP inflows are still near all time high levels.Till the time people are hopeful, market has a lot of scope to go down.
Tops are made on the peak of the good news and bottoms are made on the peak of the bad news. Don’t think that we have too much bad news around.
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You mentioned that wave 1 is done and we are in wave 2. Can you explain? Have we finished wave 1 down or up?
Sir here is the marking for wave 1 (counting from Covid lows)
@StageInvesting
Thanks for the views explained in your write up. I think we definitely have to have some working theory , irrespective of the type of style we practice. For practitioners of EW, that would obviously remain the go to theory.
I personally have a more flexible approach. EW has been difficult for me so have given up on it. But there are a lot of other patterns which helps us in knowing about the market phases we are in. I think Mark Minervini’s Staging seems like an easy thing to learn and practice.
Coming to the nifty chart, we had a strong rally from 7500 to 15400, which was a one way rally and after that there was around 13 weeks sideways consolidation between 15400 to 14100. Nifty went up slightly higher and established another sideways trading range between 15450 to 15950. And this was followed by the frothy rally to 18600. And ever since Oct 2021, we have been in a corrective mode with the structure resembling an expanding triangle. My guess is the previous consolidation ranges between 15450-15950 and 15400-14100 should be looked out for support zones as previous consolidation zones are fertile grounds for support.
At current juncture we seem to be in a medium term correction and in the short term we could probably have made a very short term bottom/double bottom closer to 15700 and we need to see how it holds up. My guess is we might see a sharp short bounce after which there could be loss of momentum and how that dip plays out needs to be seen.
I think at current juncture, the bank nifty seems to be the pain point with these banking and financials having high weightage in nifty and that is adding to the pressure on nifty. Fundamentally a lot of these banking and financials stocks have shown decent results and commentary too remains strong. Though it is not amply reflecting in stock prices. I would be keenly observing for some kind of bottoming formation in these stocks. But as of now it seems to be missing.
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Sir -thanks for sharing your views on the market direction.
My bearsihness comes from two macro points 
a) US Fed actions and thus the fear of crash in tech bubble.
b) In most of the sectors in India, we see that all 5 waves have been done and now we’re in bigger wave 2 . Many of the big names in Nifty 50 also have now entered in their corrective phase. Can hardly find any stock that can support Nifty.
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Hindustan Zinc
Many a times you dont need complex trading systems.
Rectangle patterns are good examples.
If a stock is trading between a tight range, just draw a rectange around recent trading range and the height of the rectangle is the target (in % ge) -whatever side it breaks out .
Caution:This stock may take some counter-trend bounce temporarily as it is falling down for last few days.
Chart for the study purpose only. Let’s see how it plays out.
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Pidilite Industry
Head & Shoulder Activated.
A stage 4 stock ,in wave 2 (ABC correction is on)
Let’s track whether it works out.
Disclaimer :These charts are not for recommendation purpose. These are for study purpose - whether these work out or not.
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AB Capital
A stage 4 stock. In wave 2.
Is it a rectangle breakdown ?
If yes, then it maght go near 70.
Let’s track and study.
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Realty Stocks
Already corrected a lot …would they further crack.
Well difficult to guess ! Demand seems to be right with highest number of registrations being reported and inventory levels are also low.
But technically speaking, Godrej Property share is at a very critical level ?
Like fundamental-investing, we need to consistently keep reviewing the charts also time -to-time . Like in life, nothing is 100 % certain in the markets.
On Weekly charts.
It is Stage 4, Wave 2 (ABC correction )
And it seems to be on necline of H & S.
if it breaks, downside can be huge as per pattern study.
On Monthly Charts
Holding near 40 months average.
If 40 months average of 1300 breaks , then 1200 is next support .
And if that breaks, well… too early too be too pessimistic.
But let’s track and understand whether these chart patterns work or these are just figments of imagination
Disclaimer -Chart for study purpose only.
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Keep in mind, all the shared charts are not from short term time-period.
Weekly /Monthly charts are meant for 6 -12 months prespective,
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NLC INDIA
@StageInvesting , is this stage 2 breakout ? It retested and took exect support of 30wema, Please share your ideas
Texmaco rail
Please guide in this also . After breakout with good volume and it retested . Got good order from railway for 6500 cr .
NLC India
Well -like every other stock , it is difficult to make a prediction in this kind of market ( we 're having a counter-trend bounce in the markets ).
Still tried to look at it.
Negatives
a) Currently it facing rising channel top resistance as well as a resitance (supply zone ) of 2018 levels.Although the older the resistance zone, weaker it becomes.
b) Overall market conditions - whether it is continuation of old bull trend or it is a bear market rally. If it is bear -market rally , then may be the fall was A , this bounce is B and we might have a C wave down.
Positives :
a) The stock made a 5 wave impulse from the levels of 56 and that too with volumes
b) MACD is positive (buy side ) on daily/weekly and monthly time-frames.
c) Stock took support at 30 WMA
Conclusion from technical prespectives.: If I have to make fresh entry, I will wait for 90 level to break with volumes and trade there for few days.
If i already hold this position from lower levels and planning for exit due to overall market scenario, would partially exit at 67 and fully at 56
Hope it helps.
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Texmaco Rail
Well- this is a stock like a person who has struggled very hard in the past and has given consistant disappointments.
To believe that it really has potential, one should wait for more proof.
Good & Bad
The only good things that are visible on montly chart are
a) It gave a channel breakout in recent past
b) It is taking support at 40 month average.
b) MACD is in buying zone (only monthly ) , shorter time-frames are in sell zone . So we don’t know whether monthly MACD would remain in buy zone or not for coming weeks/months .
There are many bad things
a) Stock was below 40 months moving average for last 6 years.Moved over in last 4 months only ( that too in a great bull run) .
b) Although stocks that move up over 40 months average after a prolonged period (5-10 years) happen to be multibaggers several times , but here we need it to see some more strength.
c) In last 26 monthly candles, 13 are red and 13 are green- so a big fight between buyers and suppliers. The big red candle of Feb 22 does not give much confidence.
Conclusion on technicals basis : The boy needs to show more proof of its intentions. I can keep it under watch on how it performs in coming months, but I won’t trust him as of now.
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