Nifty opened flat today but declined sharply just after opening and traded with negative bias whole day. Nifty declined more than 100 points from high but bounced 40 points from low of 8429 in end session and finally closed at 8463. We need to see the chart for next probabilities and let’s start with bigger picture.

This is 30 minutes time bar chart of Nifty covering move after Oct low 7724. In my report of 24 Oct 2014, we concluded that 8454 may be top of wave 3 followed by complex correction for wave 4 which completed at 8353. And there is start of wave 5 from 8353.

According to calculation, wave 5 can go minimum 38% extension which is at 8631. Nifty bounced till 8535 after that but started declining. So, we need to see move after 8353 closely.

This is 5 minutes time bar chart of Nifty covering move after 8353. It seems Nifty completed an Impulse (5 wave’s move) from 8353 to 8535 but it didn’t reach 38% extension (8631) for wave 5 yet. So, we can assume the whole impulse from 8353 to 8535 as inner wave (1) of 5 and decline from high 8535 can be the progress of inner wave (2) of 5.

If we calculate the retracements, wave 2 declined more than 50% till now and 61% and 70% placed at 8422 and 8406 respectively. We are not sure if wave 2 is completed or not.

Today, I posted Nifty update on my Facebook Timeline “I would like to buy Nifty here and till 8400 with Stop loss 8157.70 for target 8631-8804, CMP 8437”. There were two conditions for that: –

First, wave 2 already entered in 50%-70% retracement which is most seen Fibonacci retracement for wave 2.

Second condition, I will show you on below chart:

This is 5 minutes time bar chart of Nifty showing intraday move of 25 Nov 2014. I am not labeling any counts but just analyzing the personality of waves. I decided to buy because:

1. Second decline was slower than first decline means the whole decline is not wave 1, 2 and 3 as wave 3 is always faster than wave 1. It may be either ABC with faster A and slower/smaller C or it is full impulse. And in both cases we can expect some bounce.
2. There are overlapping of waves in 8440-8429 range which indicates that end of this decline is near either temporary or permanent.

As I always say, nothing is sure in stock market and risk is in every trade. We need to take calculated risk whenever we see probabilities and good risk rewards. I bought because bigger picture is suggesting minimum 8631 and I was seeing an impulse followed by 50%-70% correction so I took buy position but there was nothing sure in it. I just traded the possibility with calculated risk.

I traded single lot only as stop loss is big and I am not sure if correction is completed. This correction may take any shape and may show lower levels. I am still holding light buy position with 8351.7 spot as stop loss because there is no sign of upside break yet. I will wait for tomorrow’s move to decide if I need to holding position with modified stop loss or to exit.