Does Elliott Wave Theory Predicted the Nifty crash of 24 Aug 2015? This is question asked by many of my blog followers and some EWT learners. So, I am not going to give a philosophical debate for the answer of this question but want to explain something practical. So, let me start.
On 27 July 2015, I posted Elliott Wave Analysis Report of Nifty for medium term on my blog in which I expected Nifty to fall below 7940 in Aug 2015 expiry when Nifty made high of 8655. Please read the report at below given link.
And this is the main chart which suggested a low below 7940 at least:
The main reason behind this possibility was the corrective pattern formed at bottom (at 7940) which always cautioned for a decline below 7940 once again no matter what the actual pattern is going on. And I expected it in Aug 2015 only because the impulse from low was already completed at 8655, so expected that the decline has already started.
Even Nifty consolidated in 8321 -8621 for 3 weeks but I always mentioned to avoid any positional long and warned the possibility of 7940 in my every report after that. I am not posting the link for every analysis report here but you will definitely find if you scroll down on my blog.
And on 18 Aug 2015, I posted an Elliott Wave Analysis report mentioning Nifty to sell on rise only and to avoid longs. Link to the report is given below.x
I was confident for sell on rise only as Nifty has shown the bearish pattern at top now. There were 02 downward impulsive followed by upward correctives at top.
Then next day on 19 Aug 2015, I posted an analysis reports expecting a very sharp fall or good downward jerk very soon and also suggested to sell nifty positionally with stoploss of 8561 for minimum immediate target of 8321-8180. Link to the report is given below.
I expected a good downward jerk in next 1-2 sessions because there were repeated downward impulsive and upward corrective at top which nifty may not hold for a long. Nifty bounced above 8500 next day and declined almost 140 points from high.
After the fall from top, I posted a new update for 21 Aug 2015, Friday where I again mentioned that there are repeated downward impulses followed by upward correctives at top which is suggesting a good impulse on down side. And nifty can go well below 8200 so we must use trailing stoploss of 38% for our shorts and use every 23% to 38% rise to sell till we identify any reversal. Link to that report is given below:
Nifty decline 150 points again till 8225 next day followed by 23% bounce till 8320 and closed at 8299 on Friday. We were “Sell on Rise” till then and you already experienced what happened with Nifty on Monday, 24 Aug 2015. It was a biggest crash of 6% in a single day after 2008.
So, EWT already indicated a fall below 7940 a month in advance. EWT indicated that upside is limited and conditions are favorable for sell on rise only. EWT indicated that there may be a sharp fall or downward jerk soon just before the crash. EWT indicated that there may be good impulse downside and we must sell every 23%-38% rise with stoploss above 38% and we were in selling position when this crash really happened.
So again, Elliott wave theory identified right trend and suggested perfect trading strategy till end, even till low of 7541 if you read some of my last analysis reports after 25 Aug 2015. But, we can never definitely say that a crash of 6% is going to happen tomorrow because it is not the thing which happens on regularly basis. 530 points crash in Nifty happened after 2008 if I remember perfectly. So, even if a chart says that there may be a crash tomorrow our mind may not believe because it is not the thing which happens frequently. This 6% crash happens only 3 times in whole Nifty carrier, twice in 2008 and once now in 2015, pardon if I missed anything as I started applying Elliott Wave Theory only after 2011.
Important is not that EWT predicted the crash in advance, Important is that EWT identified the right trend and indicated the right direction at the time of crash. Because, when we analyze and expect a move, we always consider the minimum target first and then analyze further when it reaches that minimum target as there is no limit for maximum.
Just like in my “All time frame analysis report of Nifty” prepared on 6 Sept 2015 Elliott Wave Analysis and Outlook of Nifty for All Time Frames as on 07 Sep 2015. For short tern I expected Nifty to enter in 7622-7500 range followed by a minimum bounce till 7800-7890 without breaking below 7450. Nifty entered in 7622-7500 range, declined till 7541 and then bounced above 7800 in last 3 sessions. There also, 7800 was minimum target and we need to analyze latest wave pattern to conclude its further action.
So the morale of this article is, “There is no way to predict the future or stock market absolute accurately but EWT definitely indicated right direction, right trend, tops, bottoms and most important it helps to identify very low risk and high reward trading and investment opportunities. And we need not to care of important news and event, or what is going in Global Markets, or what RBI or FED is planning or what our politicians are doing. These waves formed by the psychology of mass participant which always speaks truth no matter what will be the outcome.
You must also read this article: Effect of Important News and Govt Policies on Elliott Wave Theory Analysis
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