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| 24 Apr 2015 - 14:00hrshrs

Elliott Waves


Ramki Ramakrishnan | AGM

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guest: Dear sir,in Elliot wave pattern where are we placed now in nifty and bank nifty?did we complete 3 waves or 5 waves?what would be the low for bank nifty in this correction wave?
Ramki Ramakrishnan: `Morning Folks! I am delighted to be able to Chat with you today. Let us confine ourselves to the topic, which is Using Elliott Waves to trade Indian Stocks. Hence, I will not be offering any tips, suggestions or ideas on specific stocks or sectors. Even the above question is too specific, but I will address it as an exception. I think both the Nifty and Bank Nifty have completed an extended third wave. As the second wave was simple, we should expect the current 4th wave to be complex. A few days ago, in an interview with CNBC TV18, I mentioned the possibility of a recovery back to the recent highs before declining to 8080. Well, the difficulty of anticipating how a complex pattern will unfold is already evident. This is why I strongly recommend to my clients and followers to keep positions small during a complex correction, and pick their levels carefully.
sagubaba: Can one use Elliot wave to trade small cap illiquid stocks?
Ramki Ramakrishnan: Generally speaking, Elliott Waves work best with liquid instruments that are widely held and well traded. With illiquid stocks, the problem is there is not enough of the `crowd` to be able to anticipate how they will behave. A few stake holders could easily sway the market sentiment. Yet, if you are patient, you might be able to capture the extremities even in these stocks, but I would.t waste my time trading such stocks.We have an ample supply of good quality stocks to trade
sagubaba: Is it the case that we are in a C wave on Nifty? Nifty has shown a bounce but failed to reach the peak of 9000 ? Where do you see Nifty on Elliot Wave
Ramki Ramakrishnan: We are in the middle of a complex 4th wave, and it is nearly impossible to say with confidence where we are in the sequence. What you think as wave C will turn out to be something else in a few sessions! Such is the nature of complex corrections.
ysr_sreenu: Dear sir ,I appreciate your wisdom in ewp .my question for today is are we completed 3 rd or 5th wave in bank nifty?as you said last time 17700 will be the bottom of bank nifty?if not what would be the bottom?
Ramki Ramakrishnan: 17,700 is likely to be one of the various levels from where a recovery could start. I would urge readers to be aware that it is one thing to make a prediction at time "A" and another to trade it at time "B". The way I use Elliott Waves is to have a framework to base my decisions on. As we approach 17,700 in Bank Nifty, I will look at the structure and composition of the sub waves that make up the decline. If I am comfortable that a minor C wave is almost over near there, i will make my first tentative investment.
sachinkumar_201: Can I trade mutual funds using Elliot Wave?
Ramki Ramakrishnan: Anything that is traded deeply in a free market is subject to crowd behavior, and hence we can use Elliott Wave Principle to get an edge.
guest: Are high pe multiples the main reason for fall?how much downside risk is left now
Ramki Ramakrishnan: The markets move up and down for a variety of reasons. While knowing that some stocks are trading at a high PE will make us cautious, we should also pay attention to where in the cycle it currently trades. If you think that a minor 5th wave inside an impulse wave is about to finish, you will exit that stock and look at something else. Elliott Waves will give you some clues about the minimum distance a correction will travel and the minimum time it will take to complete a correction. What you are asking is how far it could go down. While there is no definitive answer to that question, you can look at wave 2, if we are now in wave 4. If wave 2 was deep, it is likely that wave 4 will be shallow. Hope that helps !
krishnasaradka: Dear Sir, generally EW application is more effective in liquid securities. Given this situation how to effectively apply this to analyse mid-cap or small-cap stocks which are not so `liquid`? In your opinion how do you find its application in these situations? Or is it best to avoid it in these cases?
Ramki Ramakrishnan: I have seen EWP work well in mid caps too. You need to be aware that minor supports and targets could easily get violated in thinly traded stocks. It is always easy to label waves AFTER a move. However, when trading it real time, you need to factor in the possibility that in that particular case, the levels you have in mind may be broken. Hence, always have a contingency plan! Entering at the farthest support or target is recommended,
nsuresh68-2014: Sir, Since we have had an extended THIRD WAVE in NIFTY, S&P etc. what are the chances of an unexpected FIFTH WAVE failure ??
Ramki Ramakrishnan: Unexpected things can happen at any time! As you see the 5th wave developing, you will get additional clues yourself. Remember, even a failed 5th will have 5 sub waves.
guest: Sir, what is your view on nifty for the next 2-3 years
Ramki Ramakrishnan: As Warren Buffet once said about stocks, Nifty will go up and down. Making a prediction for the next 2-3 years is something that I am not comfortable doing. Your guess is as good as mine. There are some people who are very bullish, and they have valid reasons to think that. I personally will look for stocks with sound fundamentals, and when they dip to the end of a corrective wave, I will buy them. Over time, stocks have usually outperformed, provided you choose wisely. Thank you all for joining me today. I wish you the very best in the markets. Ramki