Nifty opened gap up on Friday at 8246 and further bounced till 8262 but failed to sustain at higher levels and started falling gradually for rest of the day to register day’s low 8210 before closing just 1 point up at 8220.
For Friday, I suggested to keep initial stoploss for longs at 8197 and further keep changing stoploss at 38% retracement of whole bounce started from 8154 if Nifty moves above 8229. And further, breaking below 38% retracement of whole move from 8154 can take Nifty near 8160 again. Nifty first bounced till 8262 and 38% retracement of whole move from 8154 to last high 8262 was placed at 8220 which triggered and possibility for decline till 8160 opened. Let’s have a fresh look at latest charts now.
Today I am showing move only after 24 May 2016 low 7715 as previous waves are not completely clear and possibilities I have explained in my previous analysis report Elliott Wave Analysis Report of Nifty for 26 May 2016.
This is 15 minutes time bar chart of Nifty covering move from 24 May low 7715 which looks like sharp impulsive move without even a 10% correction in between. The most probable wave counts I have marked on chart.
May be inner wave (3) complete at 8200 as shown on chart but it is difficult to identify if wave (4) is already completed at 8134 or still in progress as some complex type of Irregular Correction because pattern at top is bit complex in nature.
Now, if wave (4) already completed at 8134 and (5) in progress than minimum 38%-61% projection for wave (5) is placed at 8319-8433 but wave (4) is not even 23% in this case.
And if wave (4) is still in progress as some complex type of Irregular correction then 23%-38% retracement for wave (4) is placed at 8085-8014 which is expected range for completion of (4).
Though there are 02 possibilities for both upside and downside, we need to look at the move of last 2-3 days to make any trading decision. So, let’s have a look at 5 minutes chart.
This is 5 minute’s time bar chart of Nifty covering move from 31 May 2016 low 8134.
There is lots of overlapping of waves at top after a sharp bounce of 500 points and by casual look, it seems a 3 wave’s move (abc) completed from 8134-8215 followed by (abc) decline from 8215-8154. This pattern is following the guidelines of Ending Diagonal as wave (1) and (2) but there are very less chances that next bounce started from 8154-8262 is wave (3) of ED.
Because if it is wave (3) of ED in progress from 8154-8262 then Wave (4) needs to complete at or below dotted red line drawn at bottom (currently around 8160) as shown on chart because line joining (2) and (4) of ED cannot be disturbed. Margin for wave (4) of ED in this case is very low that end of wave (4) will be around 8160 where as maximum limit for (4) is 8154.
This is the confusion part in the pattern formed at top where we can’t conclude anything confidently. But 38% retracement of whole bounce from 8154-8262 is placed at 8220 which is already broken.
Now, if we assume wave completed from 8154-8262 as wave (3) or progress of wave (3) then next wave (iv) or (4) retraced more than 38%, 8220. Wave (4) more than 38% is possible but in rare cases, normally we see less than 38% retracement for wave (4). So, conditions are more favorable for selling.
And further, if we see decline from 8262 then it seems a 3 waves move till now where 8262-8233 may be wave (a or 1), from 8233-8256 may be (b or 2) and wave (c or 3) may be in progress from 8256. And there is possibility of a small Irregular Correction at bottom (shown in circle) suggesting a low below 8210 again.
We need to ignore the medium term and shorts term pattern for time being and must concentrate on very immediate waves on 5 minutes chart.
Possibilities for both bounce till 8319-8433 on upsides and a decline till 8085-8014 are there and conditions are more favorable for selling rather than buying as explained above. So, we need to make a low risk trading strategy according to these conditions.
So for tomorrow, safe trading strategy may be to “Sell on Rise” with initial stoploss of 8257 expecting minimum downwards target 8160 which further can extend to 8085-8014. Further, stoploss for shorts must be changed to 8233 if Nifty even touches 8209 and then to 38% retracement of whole decline from 8157. There is no low risk trading opportunity for buying as of now.
Trade must be initiated only if get price 25-15 points near to stoploss and part profit booking or trailing stoploss must be done when seeing profit more than stoploss.
The probable wave counts and possibilities for the whole bounce from 6825 are explained at Probable Elliott Wave Counts of Nifty from 29 Feb 2016 Low 6825