Nifty opened lower at 10514, registered high 10540 but failed to sustain at those levels and traded with huge negativity for rest of the day. Nifty declined more than 330 points to register day’s low 10261 and closed 282 points down at 10316.
Friday, Nifty was in negative zone with 10730 as immediate resistance. Bounce towards 10846-10901 was expected if Nifty breaks above 10730, otherwise further fall towards 10497-10387 was expected.
Trading strategy was to trade near resistance 10730 according to conditions but Nifty opened lower at 10514 and declined further by more than 250 point. Trade was not activated. Now, let’s have a fresh look at latest charts for further scenario.
This analysis report is covering move after 6825 and earlier wave counts are explained in my last “All Time Frames” analysis report Fresh Elliott Wave Analysis of Nifty on All Time Frame dated 03 Jun 2018.
This is daily time bar chart of Nifty covering bounce after low 6825 which I marked as start of wave [V] on daily chart in my last “All Time Frames” Report.
It seems inner wave 1, 2 is completed and 3 may be in progress from 7893. But there are 02 different possibilities after that :-
- Inner wave ‘iv’ completed at 9687 and ‘v’ in progress as Ending Diagonal Triangle (explained on this chart)
- Wave ‘3’ already completed at 11171 and ‘4’ progress as Irregular Correction (explained on next chart)
I decided to explain both the possibilities nf different charts for better understanding.
Possibility of Ending Diagonal Triangle (ED): – There is possibility of ED at top started from 9687 as inner wave ‘v’ of 3 as explained on this chart.
May be inner wave (1) of ED completed from 9687 -11171, (2) completed from 11171-9951, (3) completed from 9951-11760 and (4) may be in progress.
If this is the case then inner wave (4) of ED can never break below 9951 because start of wave (3) is 9951 and wave (4) of ED cannot break below the start of wave (3). So 9951 is pattern negation point and Nifty if even touch 9950 will negate the possibility of ED, otherwise wave (4) achieved its minimum retracements.
Overall, Nifty needs to bounce above 11760 without breaking below 9951 to justify the possibility of this ED.
Point of confusion: – The pattern of wave (2) looks like an Impulse but wave (2) and (4) can never have Impulse pattern. This pattern of wave (2) is point of confusion.
This impulsive like pattern of wave (2) of ED (from 11171-9951) is indicating the possibility of Irregular Correction and same is explained on next chart.
Possibility of Irregular Correction at top: – There is also a possibility of Irregular Correction at top and same is explained on next chart.
This is again the same daily time bar chart of Nifty covering bounce after low 6825 which I marked as start of wave [V] on daily chart in my last “All Time Frames” Report.
May be inner wave ‘3’ of [v] is completed at 11171 and ‘4’ may be in progress as Irregular Correction with inner wave (A) of ‘4’ completed from 11171-9951 as Impulse, wave (B) may be completed from 9951-11760 as (abc) and wave (C) may be in progress.
Wave (C) of Irregular Correction normally completes at or after the end of wave (A) which is 9951. And 38% retracement of wave ‘3’ is placed at 9918. So, 9951-9918 is general expected range for completion of Irregular Correction in this case. Wave (C) must have Impulsive pattern.
Personality of Irregular Correction and its inner wave (C): – Irregular Correction is a sign of strong main trend and there is always a strong reversal after completion of Irregular Correction, it doesn’t give chance to trade some times.
But last wave (C) of an Irregular Correction is known to be sharp and destructive which scares and shake the confidence of traders before reversal.
So, Nifty can first shake the confidence of mass traders (majority is already scared) and then reverse sharply to recover whole decline in very quick time if decline started from 11760 is inner wave (C) of Irregular Correction.
Point of confusion: – Inner wave ‘v’ of ‘3’ (from 9687-11171) looks like a 3 waves move. It can be Impulse with highly extended inner wave 5.
These are 02 different possibilities I can identify on charts. I am not able to identify the possibility of any bigger crash because pattern at top (at 11760) doesn’t seem completed. I can think of any bigger crash after break below 9918 only.
So, let’s analyze the decline started from 11760 to see if the decline is corrective or Impulsive.
This is hourly time bar chart of Nifty covering decline after 11760 which I am analyzing independently because there are multiple possibilities on higher time frames.
The decline is very sharp without any reasonable pullback and carrying the personality of Impulse but I am not able to identify inner wave counts for Impulse right now.
Wave counts wise, the decline seems corrective as Double Zigzag Correction with first (abc) cycle completed from 11760-10866, wave (X) completed from 10866-11191 and 2nd (abc) may be in progress from 11191. Normal 100%-123% projection for 2nd wave cycle is placed at 10297-10086.
These are the counts which fit better within this move but there is lack of confidence. So, let’s have a separate look at decline after 11191 to calculate breakeven point at least.
This is 30 minutes time bar chart of Nifty covering decline after 11191 which I marked as start of 2nd (abc) cycle of Double Zigzag.
It seems wave (A) complete from 11191-10882, (B) completed from 10882-11145 and wave (C) may be in progress from 11145.
Within wave (C), it seems inner wave (i), (ii), (iii), (iv) is completed and (v) may be in progress from 10478. Minimum 38%-61% projection of wave (v) is placed at 10195-10020, so 10195-10020 is next target range on downside.
23%-38% retracement of progress of wave (C) is placed at 10469-10598. So, 10469-10598 is short term resistance range and 10598 is breakeven point. We can think of any bigger reversal after break above 10598 only.
Now, let’s have a separate look at progress of wave (v) of (C) on separate chart: –
This is 5 minutes time bar chart of Nifty covering decline after 10478 which I marked as start of wave (v) of (C).
It seems inner wave (1), (2) completed and (3) may be in progress from 10459. 23%-38% retracement of progress of wave (3) is placed at 10307-10336. So, 10307-10336 is immediate resistance and 10336 is immediate breakeven point on upside. Nifty if breaks and stay above 10336 for 15 minutes can bounce further towards 10459-10478.
Overall bigger picture is not completely clear but Nifty declined without completing impulsive pattern at top. So, reversal is expected to be sharp and strong whenever it happens. 9951-9918 is next strong support for possibility of Irregular Correction and Nifty is expected to reverse strongly if reverse from 9951-9918 range otherwise we need to check for otherwise possibility if breaks lower below 9918.
10598 is breakeven point on upside and any bigger reversal can be expected after break above 10598 only.
(Actually, conditions are very difficult because there is confusion on every time frame. I took 5 different charts after hours of research but still unable to identify any exact confident pattern)
For very short term or Intraday: – Nifty is expected to decline further towards 10195-10020 and 10307-10336 is immediate resistance on upside. Nifty if breaks and stay above 10336 for 15 minutes can bounce further towards 10559-10478 otherwise fall towards 10195-10020 is expected.
We need to keep all these conditions in mind while deciding next trade.
Trading Points of View:
Nifty is in negative zone as trading below breakeven point 10598 and next strong support is 9951-9918. So, any confident positional trade can be decided near these levels only.
Nifty if decline below 9951 then any Out of money call of Dec 2018 expiry can be bought in 9951-9918 range to hold till further update. Call which is trading around 40-50 is safe as risk is low. Trade in light quantity because trade is based on the possibility of Irregular Correction otherwise there is no sign of reversal yet.
On upside, we need to wait for bounce towards 10598 to decide next trade.
For Intraday or Very short term: – Nifty if breaks and stay above 10336 for 15 minutes can bounce further towards 10459-10478 otherwise fall towards 10195-10020 is expected. So, stoploss for sellers is 10351 (some points above 10336) and buying can be done after break above 10336 only (15 minutes stay above 10336). Traders can plan their own trade based on this condition.
Otherwise, safe traders must take rest for some days until we get clarity of exact pattern because practically it is not possible to trade with small stoploss in such huge volatility and trading in options is not rewarding because premium is already very expensive.