Nifty opened Gap down at 8336 but bounced immediately after touching low of 8329 and traded with strength for rest of the day. Nifty broke yesterday’s high 8421 in end session as expected yesterday before closing 37 points up at 8398. Let’s have a look on latest chart.
This is 15 minutes time bar chart of Nifty showing move after Friday’s low 7940. It seems wave (1) completed from 7940-8034, wave (2) is completed from 8034-7952 as Irregular Correction, wave (3) or [(iii) of 3] completed from 7952-8398 and wave (4) or [(iv) of 3] also completed at 8329 today as an Irregular Correction. And wave (5) of [(v) of 3] is in progress.
If you see the red counts on chart then both waves (2) and (4) are Irregular Correction which is not following the rules of alternation. So, it may be just inner wave (iii) of 3 completed at 8398 as shown by Blue Counts on chart.
But no matter if it is wave (3) or inner wave (iii) or (3) completed at 8398, one more bounce above 8450 may be till 8503-8612 is possible in both cases for wave (5) or (v) of 3. And now trailing stop loss for existing/positional longs must be 8329 which is start of last move.
Nifty charts are suggesting higher levels above 8450; whereas 8503-8612 is also possible and stop loss for existing/positional longs should be 8329 which is the start of last wave. Today’s closing pattern is suggesting Gap Up tomorrow.
As I am suggesting from last 9 sessions, avoid selling in hope for corrective declines and “Buy on Dips” should be the trading strategy for short term.
Safe Trading Strategy:
As I suggested in my yesterday’s report, VIX is at lower levels of 15-16 and there are 35 days left in July expiry on 30 July 2015. Thus Nifty options are available at very cheap price which is suitable for buying both calls and put of same strike price difference in equal quantity for safe profits.
Example: When Nifty at 8400, one can buy 8200 Puts and 8600 Calls in equal quantity to book whenever seeing reasonable profit. This strategy can be followed repeatedly till 15 July.