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ELIOT WAVE STUDY- II

 WAVE CALCULATION

USED FOR PRICE CALCULATION
1) Wave 2 is 0.618 times Wave 1
2) Wave 3 is 1.618 times Wave 1
3) Wave 4 is 0.382 times Wave 3
4) Wave 5 is equal to Wave 1
5) Wave A is 0.382 times Wave 5
6) Wave B is 0.618 times Wave A
7) Wave C is equal to Wave A
 
USED FOR TIME CALCULATION
1) Wave 2 is 0.618 times Wave 1
2) Wave 3 is equal to the sum of time between Wave 1 and Wave 2
3) Wave 4 is 1.382 times Wave 2
4) Wave 5 is 1.382 times Wave 4
5) ABC waves is half in length to 12345 waves
6) Wave A and Wave C are of same time duration.
7) Wave B is 0.618 times Wave A

BUTGET EFFECT - STOCK WISE

1. Positive Announcement
Likely To Benefit Scripts

2.Rs. 25,000 Crore Disinvestment
Hind Copper, NMDC

3.RBI Mulling giving banking licences to Pvt.Players & NBFC's
Tata Investment,Rel Capital, Ind.Lease Development, IL&FS

4.Extended Interest subvention for export credit for 1 year
Rajesh Export,S Kumar,Timex,Emmby Poly

5.Recapitalisation of Banks(RRB)
UCO,CBI,Dena,Syndicate

6.Rs. 300 Crore for Agri Inputs
Rungta Irrigation

7.42% higher allocation for Infrastructure
RIIL,GTL Infra,Sobha,Ultratech Cement

8.Increase Allocation for road projects by 13%
IRB infra,RIIL,LT,Ultratech Cement

9.Power Capacity more than double allocation
R Power,JP Power,Suzlon,Websol

10.61% more fund allocation for renewable enerdy development
Websol,Suzlon,JP Power

11.Clean Energy Fund
Websol,Suzlon,JP Power

12.Extended Interest subvention for low cost housing
Sobha,LIC,ICICI,Gruh Fin.,Ind.lease

13.Allocates Rs. 19 Bln for Unique ID project
Geodesic,Bartronics

14.MAT increased to 18% from 15%
All co's paying higher MAT will have negative impact

15.Surcharge Tax reduced to 7.5% from 10%
All co's paying higher ST will have positive impact

16.Rs.16,500 Crore allocation to PSU banks
PSU Banks

17.Rs.400 Crore for Green Eastern States
Rungta Irrigation

18.To Set up more 5 mega food park
Godrej Consumer,Godrej Ind.

19.To provide Facility for storage like cold storage,Cold room
BOC

20.To provide finance of Rs. 25000 Crore in next 3 years for infrastructure
Infrasturcture companies like RIIL,GTL Infra

21.Competitive bidding process for allocation coal blocks
RNRL,Sesagoa,Guj NRE,Electrosteel Casting

22.Solar,Small hydro & micro power projects of Rs. 500 Crore
JP Power,Websol

23.Rs.200 Crore Grant for Knitwear industry
TT,Emmby Poly

24.16% more allocation & state alllocation of Rs.3675 crores for education
Educomp,Everon,Hathway Cable

25.Almost Rs.3000 crore more alllocation for health
Indraprashth Medi,Fortis

26.Rs.66,100 crore provided for Rural Development
Godrej Ind.,Rungta Irrigation,RCF,NFL

27.Cash Allocation for Fertilizer companies
RCF,NFL

28.Rs.48,000 Crore allocated for rural dev.under Bharat Nirman
Sobha,Godrej Ind.,RIIL,GTL Infra

29.Rs.1270 Crore allocated to Rajiv Awas Yojana
Sobha

30.National Skill Development
Educomp,Everon,Hathway Cable

31.Increase Allocation for Defense
BEL,BEML,Ashok Leyland

32.To Encourage R&D of Science & Lab, weighted deduction increased
Anu Lab,Sandu Pharma,Wanbury,Jupitor Bio,Glenmark

33.To Encourage R&D of Statistical Research weighted deduction increased
Crisil

34.Full Exemption from customs duty to refrigeration units
BOC,Whirlpool,Godrej

35.Full Exemption from customs duty to Trailers & Semi Trailers
VST Tillers, M&M

36.Exempt the testing & certification of Agri seed from ST
Kaveri Seed,Advanta

37.Cereals & pulses transportation to be exempt from service tax
Nutraplus Products

38.Solar photovolatic & solar thermal power gen units exempted
Websol,Moser baer

39.Blades for wind energy generators from CED
Suzlon

40.CED reduced to 4% for LED light
MIC Electronics

41Exemption for mobile phone accessories,parts of batter chargers
Spice,Videocon

42.Exemption for medical equipments
Span Diagno

43.Toy Ballons fully exempted from CED
OK play,Hanung Toys

44.Reduction in CED on household type water filter
Ion Exchange,Hind Liver

45.Reduction in CED on corrugated boxes & cartons
Ras propack,Essel Packaging,Karur KCP

46.Partial rollback of excise duty relief on large cars
Negative Impact onM&M,Maruti,Telco

47.No import duty on some equipment in road projects
Guj Appollo Equipments

48.Petroleum products: basic excise duty of 5% crude, 7.5% on diesel & petrol; 10% on other products
RIL,IOC,BPCL,HPCL will impact negatively

49.Real estate sector now gets 5 years for completion instead of 4 years before
Sobha

50.Microwave oven's part exempted
Whirlpool,Godrej

51.Infrastructure Boost
Sobha,RIIL,Ultratech Cement

52.Surcharge Reduction
FMCG like Godrej Ind,Godrej Consumer

53.Hotel Industries
Hotel Leela

ELLIOT WAVE STUDY- 1 (GANN DATES)

IMPORTANT DATES FOR CHANGE IN THE MAJOR TREND
The following dates should be watched for important changes in the major trend of both Industrial and Railroad
stocks. If any stock makes top or bottom around any of these dates, you can expect a reversal in trend,
especially if there is a sharp decline or a sharp advance around these dates: Feb 8th to 10th, March 21st to 23rd,
May 3rd to 7th, June 20th to 24th, August 3rd to 8th, Sept 21st to 24th, Nov. 8th to 11th, Dec. 20th to 24th. These dates
are based upon a permanent cycle, which does not change. Important dates are based upon a permanent cycle,
which does not change. Important tops and bottoms are made in many stocks every year around these times.
Watch the stocks that reach extreme high or low levels around these dates.
DATES FOR ACTIVITY AND WIDE FLUCTUATIONS
The following dates indicate times when stocks will be very active and have wide fluctuations, making tops and
bottoms. While all stocks will not make tops and bottoms around these dates, some of the most active ones will
and if you watch the ones that turn around these dates, it will prove helpful in your trading:
January 5th to 7th, 12th to 15th, 18th to 24th
February 9th to 12th, 20th to 22nd, and 27th to 28th.
March 10th to 11th, very important for change in trend; 21st to 22nd important; 28th to 29th another very important
date for change.
April 3rd, 9th to 10th, 13th to 15th, 21st to 23rd.
May 3rd to 4th – watch stocks that make top around this date; 9th to 11th another important date when some
stocks will make bottom and other stocks will make top. 22nd to 23rd and 29th to 31st – very important dates for
change in trend; watch for stocks that will make top around this date.
June 1st to 2nd – quite important; 7th to 10th another important change; 21st to 23rd a more important change.
July 3rd to 5th – very important for change in trend; 9th to 10th also quite important; 21st to 24th more important.
August – one of the most important months for change in trend. Many stocks will start on their long down trend.
7th to 8th – quite important; 16th to 17th important; 23rd to 24th important, 29th to 30th of minor importance.
September 2nd to 3rd important; 16th to 17th important, should be bottom of a panicky decline. 21st to 24th
important for top; 27th and 28th important for bottom of a big break.
October 2nd; 8th to 9th; 18th to 20th very important, - which stocks which start to decline and go with them; 26th to
28th minor importance.
November 10th to 22nd – a very important period for wide fluctuations. Airplanes, radio and some electrical
stocks may have sharp advances. Other important dates for changes are 1st to 2nd, 17th to 19th, and 24th to 25th.
December 1st to 2nd important; 16th to 17th of minor importance; 23rd to 24th greater activity and of major
importance.
The above dates are not only important for changes in trend and times when bottoms and tops should be
reached, but on these dates important news is indicated and some will be of a sudden, unexpected nature, at
times favorable and at other times unfavorable, but causing stocks to be active and fluctuate, making tops and
bottoms and changing trend.

5 EMA TRADE

Here is a simple method based on 5 day EMA on highs and lows and your blog readers may want to investigate further. Signals are generated at EOD and executed on the next day. The position is closed until the next signal comes. There is also the option of stop and reverse ( instead of just closing a trade.)
Please see the chart below:

Moving Average Convergence and Divergence (MACD)

Introduction

Macd is one of the simplest and most reliable indicators available. Macd uses moving averages, which are lagging indicators but turn them into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The subtracted value when plotted forms a line that oscillates above and below zero, without any upper or lower limits. Using shorter moving averages(5 & 10) will produce a quicker, more responsive indicator(fast macd), while using longer moving averages(12 & 26) will produce a slower indicator(Slow macd), less prone to whipsaws.

Macd measures the difference between two Exponential Moving Averages (EMAs). A positive Macd indicates that the 5 or 12-day EMA is trading above the 10 or 26-day EMA. A negative Macd indicates that the 5 or 12-day EMA is trading below the 10 or 26-day EMA. If Macd is negative and declining further, then the negative gap between the faster moving average (blue) and the slower moving average (pink) is expanding. Downward momentum is accelerating, indicating a bearish period of trading. Macd centerline crossoversoccur when the faster moving average crosses the slower moving average.


In Jan.2008, Macd turned down ahead of both moving averages, and formed a negative divergence ahead of the price peak(6274).

In Oct.2008, Macd began to strengthen and make higher Lows while both moving averages continued to make lower Lows(2259).

Finally, Macd formed a positive divergence in Mar.2009 while both moving averages recorded new Lows.

MACD Bullish Signals
1.Positive Divergence
2.Bullish Moving Average Crossover
3.Bullish Centerline Crossover

Positive Divergence
A Positive Divergence occurs when Macd begins to advance and the security is still in a downtrend and makes a lower reaction low. Macd can either form as a series of higher Lows or a second Low that is higher than the previous Low. Positive Divergences are probably the least common of the three signals, but are usually the most reliable, and lead to the biggest moves.
Bullish Moving Average Crossover
A Bullish Moving Average Crossover occurs when Macd moves above its 9-day EMA, or trigger line(red). Bullish Moving Average Crossovers are probably the most common signals. If not used in conjunction with other technical analysis tools, these crossovers can lead to some false signals.
Bullish Centerline Crossover
A Bullish Centerline Crossover occurs when MACD moves above the zero line and into positive territory. This is a clear indication that momentum has changed from negative to positive, or from bearish to bullish. After a Positive Divergence and Bullish moving average Crossover, the Bullish Centerline Crossover can act as a confirmation signal.

MACD Bearish Signals
MACD generates bearish signals from three main sources. These signals are mirror reflections of the bullish signals:
1.Negative Divergence
2.Bearish Moving Average Crossover
3.Bearish Centerline Crossover

Negative Divergence
A Negative Divergence forms when the security advances or moves sideways, and the Macd declines. The Negative Divergence in Macd can take the form of either a lower High or a straight decline. Negative Divergences are probably the least common of the three signals, but are usually the most reliable, and can warn of an impending peak.
Nifty showed a Negative Divergence when Macd formed a lower High in Jan.2008(& in Oct.09), and it formed a higher High at the same time. This was a rather blatant Negative Divergence, and signaled that momentum was slowing and Nifty fell strongly.
Bearish Moving Average Crossover
The most common signal, a Bearish Moving Average Crossover occurs when Macd declines below its 9-day EMA. As such, moving average crossovers should be confirmed with other signals to avoid some false readings.
Bearish Centerline Crossover
A Bearish Centerline Crossover occurs when Macd moves below zero and into negative territory. This is a clear indication that momentum has changed from positive to negative, or from bullish to bearish. The centerline crossover can act as an independent signal, or confirm a prior signal such as a moving average crossover or negative divergence. Once Macd crosses into negative territory, momentum, at least for the short term, has turned bearish.
The significance of the centerline crossover will depend on the previous movements of Macd as well. If Macd is positive for many weeks, begins to trend down, and then crosses into negative territory, it would be bearish. However, if Macd has been negative for a few months, breaks above zero, and then back below, it might be a correction. In order to judge the significance of a centerline crossover, traditional technical analysis can be applied to see if there has been a change in trend, higher High or lower Low.

MACD Benefits
One of the primary benefits of Macd is that it incorporates aspects of both momentum and trend in one indicator. As a trend-following indicator, it will not be wrong for very long. The use of moving averages ensures that the indicator will eventually follow the movements of the underlying security. By using Exponential Moving Averages (EMAs), as opposed to Simple Moving Averages (SMAs), some of the lag has been taken out.
As a momentum indicator, Macd has the ability to foreshadow moves in the underlying security. Macd divergences can be key factors in predicting a trend change. A Negative Divergence signals that bullish momentum is waning, and there could be a potential change in trend from bullish to bearish. This can serve as an alert for traders to take some profits in long positions, or for aggressive traders to consider initiating a short position.
Since Macd's introduction, there have been hundreds of new indicators introduced to technical analysis. While many indicators have come and gone, the Macd has stood the test of time. Theconcept behind its use is straightforward, and its construction is simple, yet it remains one of the most reliable indicators around. The effectiveness of the Macd will vary for different securities and markets. The lengths of the moving averages can be adapted for a better fit to a particular security or market. As with all indicators , Macd is not infallible and should be used in conjunction with other technical analysis tools.

MACD Drawbacks
One of the beneficial aspects of the Macd is also one of its drawbacks. Moving averages, be they simple, exponential or weighted, are lagging indicators. Even though Macd represents the difference between two moving averages, there can still be some lag in the indicator itself. This is more likely to be the case with weekly charts than daily charts. One solution to this problem is the use of the Macd-Histogram.

READ more on Macd @ Stockcharts.com

Combining EW with Macd:(Read the related post)
Since the last post on Oct.09, you can see the price declining sharply after a "5 wave structure" and a negative divergence in Macd.


For Investors: Investors who have a huge portfolio can use the weekly macd chart to spot the Negative divergences to "Part Book" once and during the Bearish Cross over a second "Part booking" and a last one at Bearish centreline crossover. Similarly Start buying in parts when Positive divergences start to develop and add more to it with Bullish cross over & Bullish centreline crossover.
For Traders: Use it in combination with other Technical tools such as Stochastics and with a basic EW knowledge to make entry & exits. When you combine your studies of various time frames such as Week, Day & Hour, you have potentially a system which will follow the prices to a good accuracy.
Needless to emphasise here, there are no foolproof systems in stock markets but only more efficient ones in relative term. Yourexperience, your discriminating ability to stay off the market when the picture is muddy & unclear with choppy moves, your patience to wait for good set ups/ opportunities, your intuitive risk taking ability when the euphoria & Fear are at their peaks will set you on a path to riches.