Nifty opened gap up on Friday at 8457 but failed to sustain at higher levels and declined sharply after opening. Nifty declined more than 80 points from day’s high 8461 to register day’s low 8373 before closing 6 points down at 8400.
Friday, 8344 was breakeven points and minimum 8454-8499 range was expected on upside. And Intraday shorts were suggested if “Nifty achieves 8454” and “trades below opening price at 9:31 AM” using stoploss day’s high (made till 9:31 AM) expecting minimum downward target 8380-8344 and hold for next day only if Nifty breaks below 8344. Nifty achieved 8454 at opening and was trading below opening price at 9:31 AM and then achieved intraday target 8380, trade closed Intraday because 8344 was not broken. Let’s have a fresh look at latest charts for further scenario.
Today I am covering bounce from 26 Dec 2016 low 7893 and earlier wave counts are explained in my previous analysis report Elliott Wave Outlook of Nifty for 11 Jan 2017 Onward.
This is 30 minutes time bar chart of Nifty covering bounce from 26 Dec 2016 low 7893. The whole bounce from low started slowly and gained speed as progressed higher.
Same as I explained in my last analysis report, it may be wave (3) completed at 8183, (4) completed at 8133 as “Irregular Correction” and wave (5) may be in progress from 8133. Wave (5) already achieved 100% projection placed at 8428 and is highly extended wave (5).
23%-38%-61% retracement of this upside impulsive wave (from 7893-8461) is placed at 8326-8244-8109 respectively which is the expected range if correction already started from 8461.
Wave (5) I have marked (started from 8133) is highly extended (projected more 100%) but still there is no clear sign of reversal. This whole move from 8133-8461 needs to retrace 100% with speed if it is really extended wave (5) otherwise it may not be wave (5), rather it may be inner wave (v) of (3) as explained below in other possibility.
Other Possibility: It may also be inner wave (iii) of (3) completed at 8183 and inner wave (v) of (3) in progress from 8133 as overall bounce from low 7893 still seems faster, progressing with gap openings (personality of wave 3) and with inner extended waves without giving any clear signs of reversal. So, we will let this impulse started from 8133 complete first and further will look if it was wave (v of 3) or (5).
So, let’s have a closer look at the progress of wave (5) started from 8133 for more clarity.
This is 15 minutes time bar chart of Nifty covering move from 02 Jan 2017 low 8133 which I am expecting as start of wave (5).
The first bounce from 8133-8219 with overlapping of waves looks like “Leading Diagonal Triangle” (LD) and I had explained this whole pattern in details in my earlier analysis report Elliott Wave Outlook of Nifty After Break Above 8274 – Example of Leading Diagonal
It seems wave (i) completed from 8133-8219 as Leading Diagonal, (ii) completed from 8219-8181 and (iii) completed from 8181-8306 (not extended), wave (iv) completed from 8303-8227 (retraced more than normal 38%) and wave (v) may be progress from 8227.
Wave (iii) is not extended so wave (v) needed to extend. And wave (v) is already highly extended after achieving minimum 61%-100% projection, even projected more than 123% after breaking 8440. But wave (v) is sharper and progressing with gaps and without any clear sign of reversal.
So here again, wave (v) rarely extend above 100%-123% but this wave (v) already extended above 123% even with speed and gaps. So, maybe I am missing something and it is not wave (v) of (5) or it may part of bigger wave (3). But if it is really an extended inner wave (v) of Extended (5) then we can see a very sharp fall towards 8227-8133 [Start of wave extended (v of 5) and (5]).
100% retracement of extended wave 5 with speed: We often see 100% retracement of extended wave 5 with speed (personality of wave 5). But this condition is applicable only on main wave (5), (v or 5), (5 of A) and (5 of C). But this condition is not applicable on inner wave (v) of bigger (3) because wave (3) is known for speed, length and gaps. Wave (3) is known for larger projections and smaller correction and there is no limit for extensions within wave (3).
And if we look at inner waves of wave (V) started from 8133,
Wave is still progressing with speed and gaps carrying the personality of wave 3 and very last bounce at top from 8382-8461 looks like 3 waves (abc) move. This (abc) wave at top is indicating the possibility of “Irregular Correction” at top and new high above 8461.
In my last report, I was expecting 8382 as start of wave (5) and expecting minimum 38% projection for wave (5) at 8454. Nifty achieved 38% projection but pattern of wave (5) is not clear. Wave (5) can only be “Impulse” or “Ending Diagonal” but pattern of this wave from 8382-8461 looks like (abc). So, we shouldn’t consider 8461 as completion of wave yet and need to wait for clear pattern.
As there is possibility of Irregular Correction after 8417 [end of inner wave (3) of (v)], we need to calculate 38% retracement of move from 8227-8417. So, 38% retracement of whole move from 8227-8417 is placed at 8344 and same is the point below which we can think of any reversal and same can be referred as stoploss for existing longs.
On the other hand, minimum 38%-61% projection of the move from 8227-8417 is placed at 8445-8490 when calculated from Friday’s low 8373 and high of the wave is 8461. So, we can expect minimum 8461-8490 if there is really an Irregular Correction at top.
Let me show you the possibility of Irregular Correction separately on 5 minutes chart for more clarity.
This is 5 minute time bar chart of Nifty covering move after 12 Jan 2016 high 8417 which I have marked as end of inner wave (3 of V) of bigger (5).
If we look carefully then the decline from 8417-8382 looks impulsive but bounce from 8382-8461 looks like 3 waves move followed by sharp decline. The whole structure is carrying the personality of Irregular Correction. So, we can’t ignore this possibility while preparing any trading plan.
If we look at bounce after Friday’s low 8373 then there is 3 waves bounce which can be wave (a or 1), (b or 2) and (c or 3). End of (a or 1) is 8391 which is the point we can refer to initiate Intraday trade.
After having a careful look at all the chart, there is no major change in Nifty outlook at present point. We had seen some correction after achieving 8454 as expected but with the possibility of Irregular Correction at top. So, there is no clear sign of reversal yet and possibility of a high above 8461 is still there.
On the other hand, if it is highly extended wave (5) in progress from 8133 then Nifty can give a sharp crash like decline towards 8219-8133. So, we need to keep both the conditions in mind while preparing trading strategy and need to initiate trade based on inner/smaller waves.
For short term, 8344 is still the breakeven point below which we can think of any reversal and same must be the stoploss for existing longs whereas 8461-8490 is the minimum possible range we can expect on upside.
8391 is the point which we can refer to initiate intraday trade.
For Trading Point of View:
Nifty is still carrying the personality of wave (3) and there is no sign of reversal, so think of any shorts only after break below breakeven point 8344 after confirming with the pattern. Don’t try to catch the top because Nifty may rise with same speed if some sort of wave (3) is still in progress. On the other hand, keep strict stoploss for longs because we can see a crash type fall if it is extended wave (5) in progress from 8133.
- Those who are already holding positional longs can use same stoploss of 8343 and 8461-8490 is minimum expected range on upside. Keep strict stoploss for longs.
- If Nifty “don’t break 8391” and “trades above opening price at 9:31 AM” (Both conditions must match) then intraday longs can be taken using stoploss of low made till 9:31 AM expecting upside target 8461-8490.
- If Nifty “breaks below 8391” and “trades below opening price at 9:31 AM” (Both conditions must match) then Intraday shorts can be taken using stoploss of high made till 9:31 AM expecting downward target 8344-8326 which further can extend towards 8227-8133. Hold shorts for next day only if Nifty breaks below 8344.
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