Nifty opened mild gap up on Friday at 8721 but failed to sustain at higher levels and traded with negative bias for rest of the day. Nifty declined to register day’s low 8664 before closing 11 points down at 8697.
Friday, trading strategy was to Buy Nifty only if touch 8732 with stoploss of 30 points otherwise wait for identification of any other pattern to initiate trade. Nifty failed to break above 8731 on Friday and trade didn’t activate. Let’s have a fresh look at latest charts for further scenario.
Today I am covering move from 29 Feb 2016 low 6825 and previous waves counts are explained in my all time frames report Elliott Wave Counts of Nifty for All Time Frames as on 18 July 2016.
This is daily time bar chart of Nifty covering move from 29 Feb low 6825. Nifty is rising from 6825 without even a 38% correction in between but with lots of overlapping which makes it difficult to identify inner waves confidently.
By casual look it seems an impulse completed from 6825-7992 which could be wave (A or 1), decline 7992-7678 may be wave (B or 2) and wave (C or 3) may be in progress from 7678. Wave (C or 3) already achieved 100% projection after breaking 8845 whereas next 123% is placed at 9120 which is exactly the all time high.
Within Inner wave (C or 3), it seems inner wave (iii) of (3) is completed at 8728 and (iv) may be in progress as some sort of Complex Irregular Correction OR wave (iv) is already completed at 8540 and (v) is in progress as Ending Diagonal Triangle.
I am not able to conclude any confident outlook from this chart but pattern formed at top is looking either progress of Ending Diagonal or Corrective wave. So, overall possibilities are favoring a high above 8968 once again in medium term before any big fall but it is difficult to say when and by which pattern.
So, we need to concentrate on decline from 8968 for immediate outlook.
This is 30 minutes time bar chart of Nifty covering decline from 8968. The first decline from 9868-8688 may be wave (A) but inner waves are not convincing. Further bounce from 8688-8893 may be wave (B) as Double Zigzag Correction as explained in previous reports and further wave (C) may be completed at 8555. Wave (C) projected 100%-123. Wave (5) of (C) started from 8800 was highly extended (projected more than 123%) which already retraced by 100% after breaking above 8800.
On the other hand, if this correction started from 8968 is already completed at 8555 as Simple Zigzag then this new impulse started from 8555 needs to break above 8968. Otherwise, Nifty can decline below 8555 only if this correction started from 8968 turn into Complex Correction (Double Zigzag or Triple Zigzag).
Possibility of Good Sharp Decline or Crash: Nifty can decline sharply or crash only if the decline from 8968-8555 which I have marked as (a), (b) and (c) is actually (1), (2) and inner wave (i) of (3). But this possibility is very rare and I mentioned just for EWT learners to keep in mind so that they can identify in advance if it is really going to happen.
Let’s analyze the bounce from 30 Sep 2016 low 8555 to prepare further trading plan: –
This is 5 minute time bar chart of Nifty covering bounce after 30 Sep 2016 low 8555.
By the casual look, the bounce started from 8555 seems impulsive with inner wave (1) completed from 8555-8617, (2) completed from 8617-8565 as Simple Zigzag, (3) completed from 8565-8808 but wave (4) may be completed at 8664 as Simple Zigzag or still in progress. Wave (4) retraced more than normal 38%, even retraced almost 61% but still above its maximum limit 8617.
But if the bounce from 8555-8806 which I have marked as (1), (2) and (3) is actually (a), (b) and (c) then we can see a new low below 8555 once again. I am caring about this possibility because wave (4) as per the pattern we are marking is retraced deeply about 61% which is not normal. That is the reason why I am marking the further decline from 8806-8664 which looks like a 3 wave’s move as wave (a or 1), (b or 2) and (c or 3).
Now, 38% retracement of wave (c or 3) from 8781-8664 is placed at 8708 above which we can think of upside reversal. So, breaking above 8708 may take Nifty further towards 8780-8806 again.
For Medium Term, Nifty outlook is still positive as the structure of pattern formed at top looks corrective and Nifty must break above 8968 once again after completion of this corrective pattern. Otherwise there is a possibility of good decline or crash only if the decline from 8968-8555 which I have marked as (a), (b) and (c) is actually (1), (2) and inner wave (i) of (3) which is rare and same I have explained above.
For Short Term, conditions are still favoring a bounce above 8806 but with lack of confidence so we need to wait for fulfilling a condition to initiate any trade with small stoploss.
For Trading Point of View:
Nifty if even touch or break above 8709 can be bought with stoploss of 8695 (below Friday’s close) expecting minimum targets 8781-8806. But keep trailing stoploss if trade goes in favor because pattern is not completely clear. I can’t suggest any trade in case Nifty fails to break above 8709.
Trade must be in minimum quantity and with strict stoploss to avoid heavy loss if trade goes wrong in such conditions. And avoid holding any heavy un-hedged trade overnight because market is closed for 02 days on 11th and 12th Oct 2016.
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