Nifty opened Gap up above 8380 at 8402 on Friday as I expected in my last Elliott Wave Analysis report of Nifty and consolidated around opening price for an hour. Then Nifty gave breakout above 8413 to rise more than 100 points after breakout before closing huge 162 point up at 8518.
There was a golden confident opportunity to buy Nifty with small stoploss of 15 -20 points as I suggested in my last report “If break above 8413 then stoploss for buying should be 8381” and there was confident formation of Leading Diagonal (LD) which I explained later in this report. Let’s analyze latest charts to conclude further road map of Nifty.
This is hourly chart of Nifty covering move after 2015 low 7940. It seems an impulse completed from 7940 to 8655 as shown on chart and also explained in many of my previous analysis reports. Please read the counts on charts carefully.x
There is a decline from 8655-8321 after completion of this impulse which is also carrying the personalities of Impulse so it may be wave (A) and correction. If I break down the whole pattern after 8655 then most probably:
- Wave (A) completed from 8655 to 8321 as impulse.
- Bounce from 8321 to 8621 may be wave (B) or just inner wave (a of B) as it looks like impulsive rather than corrective.
- Decline from 8621 to 8338 may be wave (b of B) or (1 of C).
- Sharp bounce from 8338 may be wave (c of B) or (2 of C). If it is (c of B) then Nifty can rise till 8621 -8655 to complete wave (B) followed by sharp decline below 8321 to complete wave (C). If wave (B) is already completed and it is wave (2 of C) then Nifty must fall sharply as wave (3 of C) without breaking above 8621.
- Read the counts shown on charts step by step and try to understand it.
Fibonacci Calculation wise, 38% retracement of this impulse from 7940 -8655 is at 8380 and 61% is at 8213. Nifty already achieved more than 38%, so 61% at 8213 is highly possible if this pattern is really the progress of ABC correction after completion of impulse.
So, conditions are not confident and favorable for any positional longs as there are possibilities for a decline till 8321 -8180 again without going much higher above 8655.
Other rare possibility:
If the impulse completed from 7940 -8655 is wave (1) and 8655 -8321 is wave (2) followed by next move as inner wave (i) and (ii) of (3) then nifty can bounce sharply from here without limits on upper side. This possibility is rare as structure of inner waves is not in favour but we should not take things granted. Upside must be faster in this case without any reasonable break so next 2 -3 sessions will clear the doubt.
Let’s have a close look on bounce after Wednesday’s low 8338 on separate 5 minutes chart:
This is 5 minutes time bar chart of Nifty covering move after 12 Aug low of 8338 which I am expecting as wave (c of B) or (2 of C) as explained above. This wave must be impulsive in case of (c of B) to break above 8621 and must be corrective in case of (2 of C) to complete below 8621.
Looking at the inner counts, it seems wave (1 or A) completed at 8428 followed by wave (2 or B) from 8428 -8341 and wave (3 or C) started from 8341 which is somewhere in inner wave (iii) as presented on the chart. Please read chart carefully and try to understand counts.
First impulse from bottom completes below start of last downward impulse (Reflex Point) so there are less chances that it’s a start of any huge upside impulse to go above 8655.
Nifty closed at high without showing any reversal so possibilities for higher levels are there. So, stoploss for any existing longs must be some points below 8457 which is 38% retracement of wave (iii). Stoploss for Shorts cannot be suggested at present conditions as there is no sign of reversal or completion of upside impulse yet.
Practical Example of Low Risk/High Reward Trade using Elliott Wave Theory Pattern:
There was a golden opportunity to buy Nifty Intraday on Friday with low risk for higher reward I explained in next chart.
This is again 5 minutes time bar chart of Nifty covering Intraday move of 14 Aug 2015. It was a golden opportunity to buy Nifty with small stoploss for huge profit as there was confident formation of Leading Diagonal (LD) as shown on chart.
Even if there was confusion between Leading Diagonal (LD) and Ending Diagonal (ED) at initial stage then also there was confident confirmation after breakout from upper line of Triangle at 8415-8520 as upper line should not break in case of (ED) and Stoploss was very small at end of wave (2) at 8398.
“The important patterns like Leading Diagonal, Ending Diagonal, 3-3-5 Flat Correction, Irregular Correction and Triple Zigzag often forms on charts and can give you huge profits with relatively very small risk if you identify it at time. That is the reason I always advise everyone to Learn Elliott Wave Theory yourself because it is only you who can identify these low risk high reward trading opportunities on time if you are seeing charts during live market hours. These opportunities come for a while which need immediate action.”
Please read the topic “Leading Diagonal Triangle” of chapter “Diagonal Triangle” of my book “Practical Application of Elliott Wave Principles by Deepak Kumar” to understand the importance of this highly profitable pattern and compare if this pattern have shown the same personality and structure as I explained in the book. Make a note of it as it can give you great profit in near future.
By analyzing both Hourly and 5 minutes chart, there are possibilities of decline till 8321-8180 in coming sessions. Immediate top before this decline is not confirmed yet but it should not be much higher above 8655. So, conditions are not favorable for any positional longs. Light Positional shorts at higher levels can be taken with proper risk management as we are not confirmed of exact stoploss yet. Next 1-2 day move may clear the signs.
For Intraday or short term, there is no sign of downward reversal yet as Nifty closed at day’s high and there is no indication of completion of upside impulse. Stoploss for any existing longs can be just below 8457 which is 38% retracement of inner wave (iii).
Remember, Avoid taking any big positions in Aug puts in hope of big decline as Expiry is near and you should never lose big if our trade goes wrong. Trade must be with proper risk management.