Aurbindo Pharma (ARBN) stock is presently in consolidation after a very sharp rally of more than 1000% in just 2 years after 2014. I was just looking at its charts and found an Irregular Correction like pattern at top, so I further went through all time frames of these stocks and decide to prepare this analysis report.
There is lot to learn in this analysis report and understand how all the tools of Elliott Wave Theory (Wave patterns, Wave Personalities and Fibonacci Calculations) and different time frames can be used to conclude most probable movement of a stock or index and how to prepare a low risk trading/investment strategy based on that conclusion.
So, let’s start with daily time bar charts of Aurobindo Pharma and it is the time frame where I identified the main pattern.
This is daily time bar chart of Nifty covering move after Jan 2016. It seems an impulsive move completed from 582-822 which can be wave (A or 1) followed by a 3 wave’s (abc) decline from 822-667 which retraced exactly 61%.
But the next bounce from 667-895 also looks like 3 wave’s (abc) move where wave (c) projected 100%-123% of (a). Fibonacci projections are also supporting this move as (abc) as 100%-123% is normal projection for wave (c).
Now, if this bounce from 667-895 is (abc) then it can be wave (B) of Irregular Correction only. Because if previous impulse from 582-822 is wave (A or 1) then next wave (C or 3) cannot be (abc). (wave C and 3 can only be impulse). So, overall pattern can be: –
- Wave (A or 1) completed from 582-822. I am considering it (A) or (1) because if it is (A) then next wave (C) has to make new high and if (1) is then also wave (3) needs to make new high. Our minimum targets will be new high in both the cases, so our aim is to trade for new high and further we can analyze if progressing wave is (C) or (3) after achieving new high.
- (abc) decline from 822-667 is inner wave (a) of (B or 2).
- (abc) bounce from 667-895 is inner wave (b) of (B or 2). This wave (b) is Irregular because it breached the start of (A or 1), thus making wave (B or 2) as Irregular Correction.
- Final wave (c) of (B or 2) is in progress from 895. This wave (c) must be impulse because wave (c) can have impulsive pattern only.
Overall 61%-78% retracement of wave (A or 1) is placed at 673-633 where 61% is already achieved.
Learners please look at the chart and wave counts carefully and try to understand step by step as I have explained above.
Read the details article explaining pattern, personality, calculations and effects of Irregular Correction at Irregular Correction of Elliott Wave Theory Explained by Deepak Kumar.
Now, the move covered on this daily chart is just of last 12 months which is not giving complete picture. So, let’s have a look at long term monthly chart of Nifty if long term chart is supporting this small pattern.
(Whenever you are analyzing a stock’s chart first time, it is very important to look at its long term chart to get complete picture).
This is monthly time bar chart of Nifty covering all time move of Aurobindo Pharma Stock. This stock moved gradually from 1 to 120 in 17 years and bounced by more than 1000% after 2012.
So, the fast and sharp wave till 891 we can assume as wave (3). (Personality of wave 3, wave 3 is always, faster, steeper, larger with gap openings).
Further 38% retracement of wave (3) is placed at 550 where as low after 891 is 582. This decline till 582 is supporting the Fibonacci Retracement for wave (4). (Wave 4 normally retrace by 23%-38% after extended wave 3).
So overall, it may be wave (3) completed at 891, (4) complete from 891-582 and wave (5) may be in progress from 582. Minimum 38%-61% projection for wave (5) is placed at 922-1132, so minimum 922 we can expect for this stock if we are right at identifying the patter.
Important Observation: – Wave (3) completed at 891 and (4) completed at 582 and this stock breached the top of (3) and registered high of 895 after 582. Many of new practitioners may mark new high 895 as end of wave (5) because it is the common mistake many of students makes while sending me chart, they ignore small but very important points. This wave from 582-895 have rare possibility to be wave (5) because of 02 reasons:-
- Wave (5) can have only 02 patterns, “Impulse” or “Ending Diagonal”. But the move from 582-895 doesn’t looks like an Impulse or ED as we seen on first daily chart.
- Minimum 38% projection for wave (5) is placed at 922 whereas high is 895 only, so wave (5) can complete only above 922. This shows either wave (5) is still in progress or wave (4) is still in progress but wave (5) is not completed yet. (Wave (5) has to project minimum 38% in case wave (3) is extended, Fibonacci Rule).
That is the reason we must be aware of all the pattern of every wave and minimum/maximum Fibonacci Calculations of every wave.
We have minimum target upside of 922 after analyzing whole longs term monthly chart and identifying expected “Irregular Correction” pattern at top on daily chart. Now, we need to low risk entry levels and exact stoploss to take position.
So, we need to analyze very last wave started from 895 to calculate entry levels and stoploss and pattern of this wave must be impulse as we are expecting wave (c) of Irregular Correction started from 895. Let’s analyze if this decline from 895 is supporting impulsive pattern and where it expected to complete if it is impulse.
This is daily time bar chart of Aurobindo Pharma (ARBN) decline from all time high 895 started in Oct 2016.
Casually, this decline seems impulsive with inner wave (i), (ii), (iii) and (iv) are completed whereas wave (v) is in progress from 804. Wave (iv) retraced deeply about 61% here but didn’t overlap (ii). 61%-100% projection for wave (5) is placed at 671-590 whereas 671 is already achieved and wave (v) is already extended.
And within wave (v), it seems inner wave (1), (2), (3), (4) are completed and (5) is in progress. This wave (5) is also extended after achieving 61% projection at 690 and next 100%-123% is placed at 650-624. Wave (5) projecting more than 123% is rare case.
Now, if we follow these wave counts then wave (c) started from 895 seems completing somewhere around 660-624. Though maximum limit for wave (c) is 582 [start of A or 1].
And if these wave counts are correct then we can see a very sharp bounce towards 756-804 because inner waves (v) and [(5) of (v) of (C)] are extended started from 804 and 756 respectively. (Extended wave (5) often retrace by 100% with speed, Personality of Extended wave 5).
And if this whole wave started from 895 is inner wave (c) of Irregular Correction then also we can see sharp bounce for new high. If it took 3 months to complete wave (c) of Irregular Correction then this stock can cover this whole wave (c) within 3-6 months. (We often see a sharp reversal after completion of Irregular Correction, Personality of Irregular Correction)
After analyzing all the monthly, daily and hourly charts and by combining all the outcomes we can conclude that Aurobindo Pharma Stock have possibility to bounce towards 922-1132 within 3-6 months. Probable downward range for reversal is 650-624 (currently trading at 651). This stock declining below 624 is rare case whereas this whole pattern will negate below 582.
Trading/ Investment strategy:
Aurobindo Pharma is currently trading at 651, stocks can be bought systematically in 651-624 range using stoploss of 619 (some points below 624) expecting medium term targets 922-1132. (Final stoploss for setup is 582 but we can exit once this stock trades below 824 and can take fresh position again if pattern support). This setup is giving minimum targets of 270 points against 30 points stoploss with 1:7 risk/reward. Small risk can be taken here.
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Advise for Learners:
It is not necessary that whatever I explained is definitely going to happen. But whatever I concluded is based on maximum probabilities after ensuring that all the rules of EWT are followed. The overall setup is giving risk/reward of 1:7 which is worthy and even if get 3 out of 4 success trades with this risk/reward then we will be good profit.
And many students asks me that how to confirm if our counts are correct. Practically there is no secret or trick to confirm if our wave counts are correct. We just needs to make sure that whatever wave counts we are marking are following all the rules (including pattern, personality and Fibonacci calculations). If you make sure that wave counts are following all the rules then wrong count will automatically be negated and you will be left with most probable counts. And when you have most probable counts then you can use those counts for trading with small risk.
You can observe that whatever is concluded in this report is solely based on rules of Elliott Wave Theory and nothing else. Elliott Wave Theory is a combination of Wave Patterns, Wave Personalities and Fibonacci Calculation which completes Elliott Wave Cycle and I used these three things only. Somewhere I took help of pattern to confirm waves, some I used personalities and somewhere Fibonacci calculation wherever most applicable and finally came to a conclusion.
Finally, I am repeating again, Elliott Wave Theory is not just counting Waves 12345 and ABC but is a combination of Wave Patterns, Wave Personalities and Fibonacci Calculations. Every single wave has a particular pattern, particular personality and maximum/minimum Fibonacci projections/retracements and you must be aware of everything to use this pattern of nature otherwise it will be confusing as maximum of analysts and general public believe.
And whatever reasoning I have done here in this report is explained in my book and I am explaining every day in my Analysis reports of Nifty. I advise learners to take every single line of my book and every analysis report seriously. If you really observe carefully then this Elliott Wave Theory is complete, easiest and simple analysis method provided you are aware of all the rules.
I have highlighted applicable points at every step so that learners can understand better. Please read every line carefully comparing with chart and content of book.
- Elliott Wave Update of Capital First Ltd (CAPF) as on 31 March 2016
- 3 Low Priced Stocks I Would Like To Buy This Diwali Expecting Multifold Returns
- Irregular Correction of Elliott Wave Theory Explained by Deepak Kumar
- Ending Diagonal Triangle (ED) Pattern of Elliott Wave Theory Explained by Deepak Kumar
- Elliott Wave Theory Explained with Examples – Wave’s Cycle
- Concept of Elliott Wave Theory Explained – Personalities of Waves
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