Nifty opened huge gap up on Friday at 8780 and bounced sharply by 100 points to register day’s high 8847 but failed to sustain at higher levels and declined back by 100 points before closing 37 points up at 8779.
Friday, trading strategy was to buy 8900 if get in 8760-8778 range with 30 points stoploss expecting targets below 8688 but further advised to avoid this trade if Nifty opens above 8778. Nifty opened above 8778 and trade for the day was negated. Let’s have a fresh look at latest charts for further scenario.
Today I am covering move from 29 Feb 2016 low 6825 and previous waves counts are explained in my all time frames report Elliott Wave Counts of Nifty for All Time Frames as on 18 July 2016.
This is daily time bar chart of Nifty covering move from 29 Feb low 6825. Nifty is rising from 6825 without even a 38% correction in between but with lots of overlapping which makes it difficult to identify inner waves confidently.
By casual look it seems an impulse completed from 6825-7992 which could be wave (A or 1), decline 7992-7678 may be wave (B or 2) and wave (C or 3) may be in progress from 7678. Wave (C or 3) already achieved 100% projection after breaking 8941 whereas next 123% is placed at 9120 which is exactly the all time high.
Within Inner wave (C or 3), it seems inner wave (iii) of (3) is completed at 8728 and (iv) may be in progress as Irregular Correction. Now, if wave (iv) of (3) of (3 or C) is really progressing as Irregular Correction then Nifty can once decline around 8540 [end of wave (a) of (iv)] or below followed by bounce above 8968 again as shown on chart by imaginary lines.
But this is just a picture to keep in mind as possibility and not to take it as granted, however we need to concentrate on decline from 8968 for time being.
Let’s have separate look at decline from 8968 on 15 minutes chart to prepare further trading plan.
This is 15 minutes time bar chart of Nifty covering decline from 8968 which I have show as possibility of inner wave (c) of (iv) progressing as Irregular Correction.
First let me explain why I was suggesting Sell on Rise and why there was lack of confidence in deciding exact stoploss for shorts: –
- The huge gap down from 8862-8832 followed by decline till 8699 is more than 200% of previous decline which is suggesting this huge gap down was some sort of inner wave (iii) and structure of previous move is also suggesting the same. So, if it is some sort of wave (iii) completed at 8699 then there must be wave (iv) upwards and (v) downwards for new low to complete the pattern.
- Now if we assume wave (iv) completed from 8699-8746 then next decline from 8746-8688 has not met minimum requirements of wave (v) as this decline is not projected even 38% with respect to any previous wave. Minimum 38% comes at 8680 even we take start of (i) at lowest high 8870. So, if the low 8688 is not end of wave (v) then it must be some sort of Irregular wave (B). And if it Irregular wave (B) at 8688 then we must see a new low below 8688 again to complete wave (v).
That was the reason I was suggesting sell on rise because the pattern doesn’t seems completed at 8688 and possibility of a low below 8688 was still there.
But on the other hand, there were repeated Waves (1)&(2) and (i)&(ii) upwards from 8688 which were suggesting higher levels.
Here, bigger pattern started from high 8968 was suggesting a low below 8688 once again but smaller pattern started from 8688 was suggesting higher levels. So, there was a clash between bigger pattern and smaller pattern which made it difficult to decide confident trade.
And that was the reason I suggested to buy 8900 Put only near 38% retracement 8778 ( in 8760-8778 range to reduce risk) with 30 points stoploss (not exact 38% stoploss) but told to avoid any trade if Nifty opens above 38% retracement 8778 (because didn’t have idea where it can go if break above 38% retracement). Finally Nifty opened above 8778 bounced till 8847 and declined back.
Now, it still seems inner wave (iii) of (3) completed at 8699 and conditions are still favoring wave (iv) of (3) completed at 8847. Though wave (iv) retraced deeply more than 61% but wave (iv) still didn’t overlap (ii) and there is no other pattern I can identify following all the rules. So, there are conflicts in wave pattern but possibility of low below 8688 is still there.
There are conflicts between the bigger pattern and small (inner pattern) if we look at whole decline from 8968. Overall conditions are suggesting a decline below 8688 once again but with lack of confidence. I say lack of confidence because pattern is not giving any exact and confident small stoploss for shorts.
So for short term, we can expect a decline below 8688 again but with an indicative stoploss (not exact) of 8809 (61% retracement of last decline from 8847-8750). There is no other pattern I can identify in present conditions.
Trading Point of View:
For shorts term, conditions are not favorable to decide any confident trade a day in advance with exact stoploss. Trade can be decided only during market hours by seeing progressive waves. But strategy can be sell on rise as conditions are favoring a low below 8688.
Trade in minimum quantity because repeated confusing swings may be there and follow strict stoploss. Have patience, respect the conditions and don’t lose the profit you made in previous rally because we are trading at middle of the wave and some stop losses may triggers. Wait for next good opportunity.
Process of deciding a trade:
None of the trade I suggested in last 3 sessions is triggered and some of new clients/subscribers are again frustrated. And some of subscribers (especially new subscribers) are taking my service/analysis reports are advisory service. Let me remind you once again that my service is not to provide you trading calls but providing a market outlook based on the analysis and then show how you can make safe trading strategies according to the conditions you concluded after analysis. These are the following points we need to keep in mind before deciding a trade: –
- Analysis of market according to rules of analyzing methods and then conclude most probable market outlook based on that analysis.
- After concluding probabilities, calculate a stoploss where the risk is small and targets are reasonable good. We need to calculate a point where risk reward is good.
- Wait for price to enter in your range where risk reward is good otherwise just wait and watch.
- Never hesitate to initiate trade when price enters you calculate entry range and hold with strict stoploss without changing the plan no matter what are the conditions.
- Then carry forward the trade accordingly by booking part profit, trailing stoploss or booking loss if stoploss triggers.
But if there is lack of confidence in any of these condition then just keep quiet and wait for next opportunity. And that is what I teach and same is the purpose of my analysis reports. I prepare these reports to teach my students that how they can identify market outlook by applying Elliott Wave Theory rules on charts, how they can calculate stoploss and minimum targets based on that analysis, how they can make trading plan for good risk reward and how they can initiate trade or act according to market conditions.
So please remember, my analysis reports are not daily or intraday trading calls. These reports are just honest analysis of market according to my understanding of waves. And I will suggest a trading strategy only when conditions are in favor. And my trading strategies are focused on avoiding loss rather than giving profits. I will never suggest a trade if I am not confident with pattern no matter if I have to wait for a week or a month and no matter if I don’t get any client.
Market repeatedly goes through different phases. Sometimes it is easy, sometimes it is confusing and we need to respect every market conditions and act accordingly. Present conditions are favorable for intraday trades but these trades can be decided during live market house only and those who have learned and understood EWT can make great use of it by trading smaller wave patterns.