HDFC Bank - on its next strong wave

Apr 27, 2023

HDFC Bank is preparing itself for a major breakout of previous failed breakout of resistance. Near term target of 1774 (CMP 1681) in 15 days (5.5% gain) and 2089 (24% gain) by 20 Jun 2023. The recent results were decent. Institutions are accumulating at around 1600 levels to ride the next big wave which is underway with increasing momentum and high volumes. Single ticks volume data suggesting that banks are accumulating big long positions in stock. Its a tactics to spread rumours in market that the results are bad, if you deep dive into financials, its better than expected. Expenses of new branches loaded, which are negative contribution earners in first year, and yet the EPS estimates are almost flat. Impressive! without those preliminary expenses, the profits would have been higher. Further, merger of HDFC and Bank would create a very strong mammoth offering synergies of scale, economies of scale and cross selling resulting into a stronger and more valuable entity.

Positive outlook is confirmed by detailed Elliott Wave Analysis, Technical Indicators and Fundamentals.

It might look contrarion approach, but I am bullish on the counter!

May 4, 2023

Trade closed manually

The stock now seems to be losing its momentum which it displayed, since this post was first published. Instead of taking form of an impulse, its forming a diagonal triangle and expected to miss its target, even though the stock is fundamentally very sound for long term. The technicals as of now suggest that its final wave e of wave 5 might end here, though it should have hit atleast 1738. this is also a place where a major retracement of primary wave and Cycle wave is due. I have exited my long positions today. it may defy my own assessment of today, which is different from what was given earlier, that was based on price volume action until that date. Post that it did not display what it should have displayed.

May 6, 2023

Trade active

I am revising my assessment, yet again. What was forming diagonal, ended with a 3 wave structure which means, that the upward movement that began on 20-6-2022 is still not over. Had the diagonal triangle completed a 5 wave structure, the movement would have been complete. The main reason for my earlier revision on may 4 was that the diagonal triangle was taking an expanding wedge shape, which many theorists believe to be a valid structure. No where in the original writings of Sir RN Elliott nor in the findings of Frost & Prechter, a valid expanding wedge was observed ever. An expanding diagonal triangle is understandable in a leading diagonal, however appearance of expanding wedge in an ending diagonal is questionable as it goes against the basic psychological tenets of "decided slowing of speed and breadth". Which means, either the market was in a "confused" state during that final movement OR it was being manipulated - either ways it does not allow continuing with the positions as analysis fails until the waves are formed. After the stock hit high of Rs. 1720 on 17-04-2023, which itself was an extended 3rd micro wave, the retracement should have gone to 1602 or maximum 1593 being beginning of wave 3 or top of wave 1. But it kept hovering above 1655. MACD, volumes and other indicators indicated a powerful upmove after 16-04-2023 leaving behind the double retracement rules. However, when the final move ended in a 3w structure, followed by a sharp decline on 8-5-23, that constitued and completed a sharp wave C of the extension following the theoritical rules. I was expecting an "exhaustion" gap in final micro wave 5, but instead saw an "acceleration" gap making wave C on 8-5-23 touching low of 1600 - just little more than its target of 1602. This is an "irregular" zigzap, which aptly fits theory. Since wave C has already achieved its target, the upward movement should get completed only in next 5 wave upwards, with the first target being final primary wave target of 1764 (earlier calculation was 1774, charts are more precisely worked out until the 1 minute timeframe now, which earlier was on higher timeframe, are more precisely calculated. Similarly, the cycle wave target is the 3rd target - 2170).

I have opened for myself fresh long positions on 5-5-23 with first target as above and next targets as per previous post.

Even if the current, so called wave C, proves to be wave 1 of downwards impulse wave A (of ABC correction of cycle wave), it may go to 1535 before retracing upwards 61.8%.

So I will tightlly monitor stop losses, near the top of micro wave 1 (1585 : -3.33%) with a target of 2022 (being 2nd target - 23.3%) with a Risk-Reward Ratio of nearly 7x and RRR of 2.25x on first target of of 1764.

If the price goes below 1584.3, then the whole theory of final wave 5 ends with a failure, and downward journey to achieve down target of 1095 to 902 in about 15-24 months should begin. Post which, it should, unless some structural cracks appear in the business model of the bank, or the industry / competitors affecting it more adversly than expected today, should begin a joyous ride upwards. As of now, limiting the view to viewable horizon.

*PS : Dont have luxury to add pic of the revised chart again.

I will keep a close watch on below alternative methods:

1. Breakout downwards, of trendline starting from the bottom on 23-3-2020, which is perfectly respected so far.

2. Slope of 200 EMA on weekly charts, turning negative. EMA 100 and 200 gap reducing / converging to the downside.

3. Breakout of resistance zone below 1574 (coinciding with yearly pivot) and previous swing low / support zone of 1387-1343, coinciding with yearly S1, and 1303 (high of previous primary wave 3).

4. Angle of linear regression curve on weekly timeframe accelerating (not just negative, but with increasing speed)

5. Volumes - in either direction - which should be moderate to heavy in either direction. If heavy, on upsurge, the 5w theory remains, if downwards breaking previous swing lows, then suggestive of bear market.

6. Signals from KNN-Machine Learning algo on TV.


If I were to invest with 10+ years horizon, I would keep accumulating periodically at each levels without waiting for downward journey to begin. Since I am taking a trading approach with max. timeframe of few days to few months, I have opened myself long position, with as much conviction as I had in my first post.

Happy to get contrary views from community, to fill gaps.

Disclaimer : Aforesaid are my own trade setup thesis and is intented only to seek suggestions/gaps/improvements from the wide community at TV. The contents herein must not be taken as any investment advise to deal in, trade, invest or othewise take exposure in the undelrying security. The readers should consult their financial advisors before making any investment decision, without relying on the contents herein.

May 15, 2023

Note

At 1678, wave 5 has achieved its first objective of equating wave 1, both in respect of time (it was to achieve on 15 May) and magnitude. It has also perfectly touched its first channel line. So there are 3 important confluences.

However, wave 5, for it to be termed so, must achieve progress, to finish beyond the top of wave 3 (1720), targetting 1788 (1764 primary wave target) as first target, therefore it normally should be wave (i) of progressing wave 5. If this wave retraces fully, i.e. below 1621, then either it would be continuation of wave 4 or end of movement (end, only if goes below 1584). The current wave, since it achieved its first target, should see normal retracement to 1644 (maybe more, but not below 1621).

Important to see how further this wave unfolds. If it goes up again, making wave (iii) of wave 5, after its retracement as mentioned above, then original targets would hold true.

For now, moving up the stop loss to 1620, from earlier stated 1585. Not willing to continue in long position if it continues to remain protracted and frustating wave (iv).

May 15, 2023

Note

What are these confluences telling us?

Minute wave target - 1792
Minor wave target - 1795
Intermediate target - 1679 - (already touched several times, and acting as strong resistance, trying to achieve next target 2106?)
Primary Target - 1820
Cycle Target - 2090

All targets below cyle around 1800 levels

May 22, 2023

Note

The current advancing wave 5 (as maintained so far, should have hit its target of 1790s by noon today (2x in time and 2.618x in magnitude), which seems improbable to achieve.

What seems to be developing is a horizontal triangle, post double correction, which is admissible as final part of triple correction. If it proves to be so, failing to break above 1654, then next target may be down to 1590 (unless the third correction also takes a zigzag or flat shape), still above 1584, the key level to determine failure of current impulse, which is third and serious hard attempt, to achieve cycle and primary targets.

The current advancing down wave is equally convincing it to be wave (iii) of wave 3 of wave A of major correction, except that volumes and momentum isn't fitting in the personality of wave (iii) of wave 3, which typically should be most powerful of all impulses, if it were to be wave A.

As of now, the long position theory isnt still invalidated. Breaking below 1590 & then 1584 would do that.

Current target - Short to 1590.

May 24, 2023

Note

Touched 1622.15 today, breaching below 1622.40, the start of so called wave (i) of wave 5. So the advance from 05-05-23 to 15-05-23 cannot be termed as impulse anymore. Only two possibilities exist now :

1) Either the current wave is wave A of Z of triple zigzag targeting 1592 as eventual target, after which no further correction, upward move to make wave 5.

2) Current advancing wave is, wave 3/C of cycle correction downwards, which should be fast (though not so fast so far).

Difficult to say which direction the trend will take, I'd be better off avoiding fresh directional calls. 1590.35 remains key level to watch before taking directional call (CMP 1619)

May 29, 2023

Note

Seems to progress on making final wave 5 of ending diagonal of corrective wave C. Short term trade target - Short to 1584 (CMP - 1635.5), SL - just above immediate swing high (small SL large multiplier trade)

May 31, 2023

Note

CMP - 1621, I am exiting short position partially to book profits and break even. This level should provide support and offer consolidation opportunities here. If I had higher appetite for risk, I would have held to short target 1590. Holding for short could be risky, the final leg of diagonal may fail to achieve full distance, though its very rare.

May 31, 2023

Note

Also to be noted, diagonals are serious warnings of a dramatic turnaround ahead, so this diagonal downwards, while upward theory remains valid, it could be risky to hold shorts to wait for diagonal to finish. Perfect entry is after the diagonal is complete and a retest is made. Downward movement that began after 4 May 23, doesnt fit to be a leading diagonal if it were to be cycle wave correction, so most of the conclusions are skewed toward s bullish market, while this would be a pullback of adequate retracement achieved.

Jun 6, 2023

Trade active

wave 5 of diagonal achieved its target of 1596. Next target 1569, may not breach 1590 and end there. I expect an upward move soon.

Jun 6, 2023

Trade active

At close today, respected the sacrosanct 1690.35 number. Current structure suggests that one more drop should be coming, creating a double bottom, if it doesnt penetrate below 1690, to begin a fresh journey upwards.Fingers crossed for tomorrow.

Jun 7, 2023

Trade active

The current downward movement has ended, analysis does not reveal possibility of another drop. Final wave ended short of its target, indicating upward bias, which is visible in momentum after 1597. Further analysis over weekend. Closed all shorts. No further longs opened yet.

Jun 15, 2023

Trade closed: stop reached

Breaching below 1590.35 (wrongly mentioned as 1690.35 in Jun.6 comment) again today, with strong momentum candle, invalidates the wave that started on 16 Mar 23 as impulse. Now many interpretations can be made, to make the theory fit into waves - the same wave making diagonal, wave 4 continuation, larger wave 4 continuation etc. But that would not be justice with the effort. It would be a stubborn effort to deduce what is not apparently clear from formations. Until the formations take proper shape, keeping the analysis on hold. This is an acceptable challenge, that wave formations usually work well in trending markets. In sideways markets, it could not only be difficult but also prone to mis-analysis. I tried to attempt the same, but the wave formations in this high supply zone (which now seems more like a distribution zone, rather than an accumulating one) are becoming increasingly complex. So bye for now, long theory stop loss has been hit, whether it continues hereafter (if this is the end of diagonal mentioned on June 7), would be beyond my analysis and reasonable professional expectation.

Jul 24, 2023

Note

The previous swing high, satisfies the 5th wave completion. The stop loss that was triggered, was flawed as dividend adjusted / merger adjusted data shows that wave (i) was not infringed upon by wave (iv), so the movement continued. However, at 1757.50, the wave satisfied the pattern sine-qua-nans, falling short of its cycle wave target of 1800s. If the current downswing after 1757 high proves to be wave ii of wave 5, then extension would be occurring. Am sad and glad that I noticed the error of not looking at adjusted data (i do main analysis on my broker's site, and i find mismatch in data between the two though the broker is linked to TV).