Nifty opened gap down at 8153 and declined further towards 8100. Nifty bounced from 8100 by 80 points to register day’s high 8159 but failed to sustain at higher levels and declined by be 90 points to register new day’s low 8070 before closing 106 points down at 8106.
Yesterday, trading strategy was to hold shorts taken in 8231-8237 range with fresh stoploss of 8203 expecting targets 8122-8066 keeping trailing stoploss of 30 points. Nifty achieved both the targets but with 50 points bounce in between. We also expected a sharp decline towards 8066 because of extended wave (5) completed as Ending Diagonal Triangle which also happened. Let’s have a fresh look at latest chart for further scenario.
Today I am covering decline from 10 Nov 2016 high 8598 to conclude short term movement as pattern of previous waves are not completely clear.
This is 30 minutes chart of Nifty covering decline from 10 Nov 2016 high 8598.
It seems waves 1, 2, 3, and 4 are completed till 8210 and (5) is in Progress from 8210. Wave (4) is Irregular Correction. Wave (5) may be completed at 7916 as it has already achieved 61% projection and in extended zone but I am not able to identify its pattern confidently.
8210, start of wave (5) of last impulse is Reflex Point in this case which is already broken but wave (5) was extended and retracement is not faster, which is point of confusion possibilities for decline below 7916 are still there. The whole decline from 8598-7916 is already retraced by 38% after breaking 8176 whereas 61% retracement is placed at 8337 which may or may not be achieved.
Further an impulsive wave seems completed from 7916-8250 which can be wave (a or 1) or (c) of any Irregular Correction. We need to analyze the whole bounce started from low 7916 to conclude further movement and to prepare further trading plan.
This is 15 minutes time bar chart of Nifty covering bounce from 21 Nov 2016 low 7916.
By looking at the pattern of whole bounce, there is Ending Diagonal Triangle like pattern at top from 8066 (Ending Diagonal is always wave 5), so the whole bounce from 7916 may be impulsive with wave (5) as ED. So, by keeping this ED in mind,
Wave (1) may be completed from 7916-8055 (pattern is not clear), wave (2) may be completed from 8055-7952, wave (3) may be completed from 8055-8122, wave (4) may be completed from 8122-8066 and wave (5) may be completed from 8066-8250 as ED which projected more than 61%. Learners, please looks at the inner wave counts of ED carefully.
38%-61% retracement of this expected impulse (from 7916-8250) is placed at 8122-8043 and started of extended wave (5) was 8066. All these conditions were suggesting downward targets range 8122-8043 and sharp decline towards 8066 which is already achieved. Next 78% retracement is placed at 7987.
Further the decline from 8250-8070 also seems impulsive which may be wave (a or 1) and 38%-61% retracement of this impulse as expected wave (b or 2) is placed at 8138-8181 where as start if inner wave (5) is 8159. So, we need to wait for a bounce towards 8138-8181, probably 8159 for formation of next wave pattern to decide further trade.
As I explained in my last few reports, Nifty broke 8210 (Reflex point) and bounce from 7916 is also showing the characteristics of impulse but 100% retracement of extended wave (5) started from 8210 was not fast which is the point of caution. (We generally see extended wave 5 retraced by 100% with fast speed). So, we need to wait for a downward corrective wave to form for the confirmation of medium term reversal. Otherwise there are still chances for decline below 7916.
Because even if the reversal is happened, then also the slower impulse completed from 7916-8250 will be inner wave (1) of big upside impulse and we will see a corrective decline as wave (2) after completion of wave (1) before start of next sharp, fast wave and bigger wave (3) upwards.
Minimum expected 38%-61% retracement of this impulse (from 7916-8250) is already happened and extended wave (5) already retraced sharply by 100% but decline seems impulsive which could be wave (a or 1).
So for Short Term, decline from 8250-8070 already achieved its minimum requirements and Fibonacci projections, so we need to wait for a bounce towards 8138-8181 range and for formation of wave pattern to conclude further scenario. Any corrective patterned completed in 8138-8181 range may initiate fresh decline towards 8043-7987.
For Trading Point of View:
For Medium Term, though some conditions matched for reversal but still without complete conformation. So wait for a perfect confident entry levels to take any positional trade.
For intraday/short term, Shorts taken in 8231-8237 range have achieved its minimum targets and a small impulsive wave also seems completed or near to completion. So, book full profit from the shorts and wait for a small bounce (probably towards 8138-8181) to initiate fresh trade.
Overall conditions are still negative (only till 8043-7987) and fresh trade must be done after seeing supportive pattern. If nifty completed any corrective pattern in 8138-8181 range (started from 8070) then fresh shorts can be taken with calculated stoploss for targets 8043-7987. But Short only if there is confident identification of corrective pattern and this scenario will be negated if Nifty achieve 7987 straight way without bounce.
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