Nifty opened flat today but declined sharply just after opening and traded with negative bias for rest of the day to fall almost 140 points from previous closing. Nifty recovered almost 60 points from low 8095 to 8161 but still closed 101 points down at 8135. Nifty also broke 8125 which I expected as maximum limit of this fall. Let’s have a look on latest charts and try to identify further moves.
This is daily time bar chart of Nifty covering move after Jan 2015 high of 8996 which I am expecting as start of wave (4) progressing as Complex Correction (may be triple Zigzag) . The detailed counts I explained in my previous report. This chart is shown just for an observation of pattern and personality of waves without counting waves.
The pattern formed in last 8 sessions which is marked in circle is often bullish in nature. Many times, this type of sharp fall results in sharp recovery for high after turning sentiments bearish and hitting maximum stoploss. But it is difficult to calculate bottom and deciding exact stoploss.
This was just for observation to note. Let’s see the same move on 15 minutes time bar chart.
This is 15 minutes time bar chart of Nifty covering move after 22 May’s high of 8489.
The decline after high 8489 have both the possibilities of Corrective wave as well as impulsive wave with 8489 to 8278 as wave (A or 1), 8278 to 8466 as Irregular Wave (B or 2) followed by sharp and faster wave (C or 3) which projected more than 161% of (A or 1) till now.
I am assuming wave (B or 2) as Irregular because the move from 8270 to 8466 is a clean impulse but the decline after 8466 is also impulsive which broke below the start of previous impulse (8270). So, the previous impulse from 8270 to 8466 can only be wave (c) of Irregular Correction.
There is no clue to identify if fall after 8467 is wave 3 or C as the move is straight and steep without any reasonable correction. There is a small reversal pattern at the bottom today.
If this small reversal pattern is wave 1 and 2 then Nifty can bounce above 8490 from here. Or if this pattern is ABC the it can be wave 4 and we can witness 1 more down leg as wave 5 of at least 120 -200 points.
Nifty crashed almost 370 points in last 3 sessions and majority turned highly bearish. But never be extra excited and short heavily. Nifty have every possibility to bounce above 8490 anytime from low as explained on 2st chart.
But the next move expected to be faster and volatile let it be for 8000 and below or 8490 and above. So, better strategy is to go long in both Cal and Put options of Nifty in equal quantity of Strike price of equal difference which I explained in my yesterday’s report. Some people asked me to give example of this strategy. Let me explain with the example of my personal trade today.
Example: Today I bought 8400 cal at 59 and 8000 put at 61 in the Morning just after opening. Total premium wave 120. Now 8400n call closed today at 45 and 8000 put closed at 81 and total premium at closing is 126 which was also at 133 when Nifty was around 8100. I could have booked 10 to 13 points profit, but I am holding the trade which is still in 6 points profit as I am expecting either 8490 or a dip of more 120 to 200 points.
It will be minimum 30 to 60 points profit if Nifty manage to touch ether 8000 or 8400 before 12 June and I can also exit either cal or put and hold rest with stoploss if I see any clear direction.
Note: Follow this strategy only when India VIX (Nifty Volatility Index) is below 20 and only when you are expecting at least 200 -300 points on either side in quick time otherwise premium will be decreased in range bound movement. Avoid this strategy in last 10 sessions of expiry as premium decrease very fast as time reaches close to expiry.