Elliott Wave Analysis Report of Nifty for 14 Nov 2014

Nifty opened Gap up today and decline for rest of the day with slow rises and sharp falls followed by sharp rise at the end. I represented expected move of Nifty on chart of my Yesterday’s analysis report “Nifty Chart is Suggesting New High Again – EW Analysis for 13 Nov 2014” and Nifty followed it exactly till now.  Before seeing the further progress of move let me show you full nifty move from 7724 to till date on hourly chart.

Hourly Chart of Nifty
Hourly Chart of Nifty

This is hourly time bar chart of Nifty covering move after 7724. I am not showing any counts on this chart as I am not confirmed of the counts yet. And today, I want to show how to trade and act when you are not confirm of counts on bigger picture.

If you look casually on move from 7724 to high it looks like straight move with gaps and only a single reasonable correction in between but overlapping and stretching of waves at the top.

Now, if you refer the personality of waves, overlapping of waves at top in upward slope is a sign of “Ending Diagonal Triangle” and Ending Diagonal represents the end of an impulsive wave. If it is end of impulsive wave there are only two possibilities:

  1. Either it is end of wave 3
  2. Or it is end of wave 5 (end of wave 5 is also the end of bigger wave 1, Wave’s Cycles)

In both the cases, there is expectation of correction after end of impulsive wave.  Correction will be smaller if it is end of wave 3 and correction will be bigger if it is end of wave 5 but a correction is expected in both the cases.

Now we need to see the ED like formation closely on 5 minutes time bar chart to identify its progress and to predict expected top of the wave.

Elliott Wave Analysis of Nifty for 14 Nov 2014
Elliott Wave Analysis of Nifty for 14 Nov 2014

This is 5 minutes time bar chart of Nifty covering move after 8290.

We can see overlapping of waves in this chart and probable counts are represented on charts:

  1. Wave 1 as 3 waves (abc)
  2. Wave 2 is simple correction (abc)
  3. Wave 3 as 3 waves (abc) and is about 123% of wave 1 thus, not extended.
  4. Wave 4 looks like complex correction.

We can consider the exceptional rules of alternation here:

  1. If wave 2 is simple zigzag, we can expect 4 as complex
  2. If wave 3 is not extended, we can expect wave 5 as extended.

There is no other possibility of wave counts if we explore the whole move considering personalities of waves.

Now, if our counts are correct then last wave 5 of ED can go minimum 61% projection which is at 8398 and Nifty need to break at least previous high 8415 to prevent 5th failure. 100% extension is placed at 8446. Wave 5 is also expected to be three waves move (abc)

Now take your book and refer “Personality and calculation of wave 5”, “Extended waves” and “Alternation of Extensions” to find why I expected at least 61% projection for wave 5 and why I shown 8415 and above as “Danger Zone” for correction.

The set up on this chart is also indicating volatile move and very sharp correction after completion of ED as last wave 5 of ED has to be extended (more than 61%) to prevent 5th failure. (Hope you know the nature of correction after completion of extended wave 5). And if wave 5 fails to break the high it becomes 5th Failure and Failure 5th is also a sign of big correction.

Next correction after completion of Ending Diagonal has to touch or break the lower line of ED, means minimum correction till lower line of ED is expected.

So the conclusion is,

As you seen the first blank chart is indication end of impulsive (wave 3 or 5 or A or C whatever) and you can always expect correction after completion of impulse (Refer Wave’s Cycles). And you are identifying completion of Ending Diagonal is near as wave (5) of ED is in progress.  

So, after identifying the completion of wave (5) of ED (it must be a three waves move), you can take short positions at high with small stoploss. Keep Trailing stoploss if your trade succeeds as you don’t know how much this correction will be. Progress of correction may give indication of its length later.

How I traded Nifty Today?

I bought Nifty Futures at 8354 when Nifty Spot was around 8325 with stoploss of 8304 spot. I bought because Nifty was very near to breakout levels (8304) I given on my yesterday’s Chart. 8304 was start of wave 3 and wave 4 should not break start of wave 3.  And I was also identifying “Complex Correction” type structure for wave 4 (There is always a one wave upside after correction). So, I took 20 points risk and bough Nifty with 8304 as stoploss and again managed to catch the perfect bottom.

Again as I always suggests, I booked my 50% position in 26 points profit before closing and holding rest 50% with stoploss above my cost. Means, I am safe unless Nifty opens 30 points gap down tomorrow.

Most of the traders must be scared after seeing 65 points sharp fall from 8390 to 8321 but I bought because EW pattern was suggesting me exact stoploss and I already expected that fall. That’s the best thing of Elliott wave Theory that it shows possibilities in advance and make you trade with confidence. Elliott Wave Theory only gave me courage to buy when majority is expecting big correction, let me see how this trade goes.

Practical Application of Elliott’s Wave Principles by Deepak Kumar

(The perfect tool to predict the future of Stock Market)