Nifty analysis with Nifty P/E Ratio vs Nifty Wolfe Wave Chart

2018년 2월 16일

Nifty P/E analysis with Nifty P/E Ratio vs Nifty Wolfe Wave Chart Pattern (This is just for study purpose )

What is Nifty PE Ratio?
Full form of PE ratio is price to earnings ratio and it is broadly used to identify how is Inexpensive or Expensive a particular index
Whether the index is Inexpensive or Expensive should be judged on the basis of its PE ratio rather than the value. Based on historical data and pure common sense, investors can safeguard their investment portfolio and earn handsome profit by following the investment rationale suggested in following table.

Valuation------------> Nifty P/E Ratio Range------ >Investment Decision
Very Expensive----------> 25 to 30------------------>It’s a rare event and Screaming sell. Search for shorting opportunities
Expensive----------------> 20 to 25------------------>Book 80% Profit And Wait For Better entry Levels
Average------------------> 15 to 20------------------>Buy Or Hold
Inexpensive -------------> 12 to 15------------------>Screaming buy
Extremely Inexpensive--> Below 12------------------>Rare Event. screaming buy

A) Fundamental Analysis : Nifty P/E analysis with Nifty P/E Ratio
Nifty P/E ratio is important as it is a measure of valuation of all the companies included in Nifty. From long term perspective, low Nifty P/E ratio is considered cheap and ideal for going long. A high Nifty P/E multiple on the other hand is assumed to be expensive and warrants caution while taking investment decisions (Booking profit or going short is a better strategy than going long in High P/E ratio scenario). The same can be depicted from studying the Nifty PE vs. Nifty Wolfe Wave chart above. When Nifty P/E ratio is at its peak (in the range of 25 to 30), nifty is also at its peak and vice versa. It's clear from the chart above that stock market witnesses a sharp sell off when Nifty P/E is near 25 and witnesses heavy buying when Nifty P/E ratio is round 12 to 15.

B) Technical Analysis : Nifty Wolfe Wave Chart Pattern
Rules & Structure of Wolfe the Wave Pattern
1. Waves 3-4 must stay within the channel created by 1-2
2. Wave 1-2 equals waves 3-4 (shows symmetry)
3. Wave 4 is within the channel created by waves 1-2
4. There is regular time between all waves
5. Wave 5 exceeds trendline created by waves 1 and 3 and is the entry point

Regardless of whether the Wolfe wave is bullish or bearish, the Wolfe wave EPA line is always drawn connecting points 1 and 4 in the Wolfe wave pattern.

I have tried to show you Nifty's from 1997s to 2018's P/E and Wolfe wave chart pattern analysis. This chart is designed only for investment decisions and new investor studies.

Using zooming in / out of the chart due to the overlaying of drawing tools