This is the same Elliott Wave Analysis Report of Nifty for 31 Aug 2016 which I sent to all of my book subscribers and clients and posting here on my blog also for future reference as there is perfect example of Double Zigzag Correction of Irregular Correction in this report.
Nifty opened gap up today at 8646 and traded with huge strength for rest of the day. Nifty bounced about 140 points for the day before closing huge 136 points up at 8744.
Yesterday, short term trading strategy was “Buying on Dips” using exact stoploss of 8573 expecting minimum target 8699 which further can extend above 8728 and suggested ho hold suggested Sept 8800-8900 Calls bought on Friday. Nifty bounced sharply carrying the personality of wave (3) and achieved target of 8728 and both 8800-8900 Nifty calls are more than double of entry levels. 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. Minimum 61% projection for wave (C) is placed at 8399 which is already achieved and minimum 100% projection for wave (3) is placed at 8845.
Within Inner wave (C or 3), it seems either wave (3) or (5) in progress. If it is still inner wave (3) in progress then inner waves are not clear to calculate its exact top and we can expect 23%-38% retracement (250-400 points decline) after completion of wave (3).
But, if wave (3) is already completed at 8728 and wave (4) is already completed at 8540 (not achieved even 23% retracement) then minimum 38%-61% projection for wave (5) is placed at 8941-9188.
There is lack of confidence in wave counts of this whole bounce from 6825, the only thing we can conclude is, either we can see a bounce towards 8941-9188 if Nifty have to move upwards otherwise a decline of 250-400 points is expected in near term. Conditions are favouring upside at present.
Now, we need to look at the bounce from 11 Aug 2016 low 8540 which I am expecting as start of new upside impulse.
This is 15 minutes time bar chart of Nifty covering bounce from 11 Aug 2016 low 8540 which I am expecting as start of new upside impulse.
It seems wave (1) completed from 8540-8683, (2) completed from 8683-8543 as Double Zigzag Correction (abc-x-abc) and wave (3) may be in progress from 8543. Further wave (3) seems within its inner wave (iii) and already achieved minimum 100%-123% projection whereas next 161% is placed at 8774.
23%-38% retracement of wave (3) progressed till now (from 8543-8750) is placed at 8701-8670. So, fresh stoploss for existing and fresh longs must be 8669 (below 38% retracement 8670) and any fresh longs can be initiated between 8701-8670.
Breaking below 8670 may open the possibility of Irregular Correction again for decline below 8540. But conditions will be confirmed later after seeing the pattern if Nifty managed to break below 8670.
Example of Complex Correction as “Double Zigzag Pattern” and Learning Experience for Students:
There is perfect example of Double Zigzag correction on above 15 minutes chart. Wave (2) from 8683-8543 is clear Double Zigzag Correction with (abc-x-abc) structure. And wave link (X) between both (abc) cycles is Irregular Correction.
So, there is Irregular Correction wave (X) within this Double Zigzag which made it even more complex and this is the reason why it took long time to complete and confused many. We were going long at completion of every (abc) cycle for target above 8728 from last 12-15 days and Nifty was bouncing from our entry levels but failing to break above 8728 every time and our trailing stoploss was triggering repeatedly.
Last 12-15 days must be a great experience for learners to see live example how a Complex Corrections forms, how it confuses, how we can handle it in between and finally how to make use of it as great profit opportunity.
I believe now many of my students and subscribers understood that it was not that Elliott Wave was not following rules or pattern, but the pattern forming was so complex that we were unable understand it in between. But now, this whole pattern completed as a clean and clear Double Zigzag Correction and we caught it later at perfect time for great profit after managing it in between.
At last I am repeating the same words again. Never be frustrated when you are not able to identify any clear wave pattern. May be some complex pattern is in formation which definitely will show the signs later. And this is the nature of stock market and it happens frequently, market often takes 80%-90% of the time to decide where it want to go but reach the destination in just 10%-20% of the time. And Elliott Wave Theory helps to handle that 80%-90% of the time satisfactory to take the benefit of most important 10%-20% of the time.
Finally Nifty broke above long awaited 8728 without breaking 8540 as we expected. Now Nifty still have scope for higher levels till 8774 and above but trailing stoploss for existing and fresh longs must be 8670 which will move higher if Nifty move higher above 8750. Any decline towards 8701-8670 may be bought again for new high of this rally.
Nifty breaking below 8670 may open the possibility for decline below 8540 again as there will be a possibility of Irregular correction on higher time frame.
For Trading Point of View:
For short term, trading strategy must be “Buying on decline” and trailing stoploss for existing and well as fresh longs must be 8669 now. And fresh longs can be taken on decline towards 8701-8670 range only with stoploss of 8669 to maintain good risk/reward.
Both 8800-8900 Calls taken on Friday are more than double of entry levels. So, 50%-70% profit may be booked in calls and hold rest with trailing stoploss.
Breaking below 8670 may open the possibility for decline below 8540 again but trade can be decided after seeing pattern only with small stoploss.