Nifty opened mild gap up at 8391 and bounced further to register day’s high 8417 but traded in very narrow range of 30 points between 8390-8415 for rest of the day. Finally Nifty closed 26 points up at 8407 after registering the low of 8382.
Yesterday, 8327 was the breakeven point and a small or big correction was expected from 8400-8440 range. Nifty entered in 8400-8440 range and consolidated there for whole day. Let’s have a fresh look at latest chart 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. This is the same chart with explanation which I had explained in my yesterday’s report as there is no major change in wave counts on this chart.
Overall, 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 normal 38%-61% projection after breaking above 8312 and is extended wave whereas next 100% projection is placed at 8428, Nifty achieved 8417 till now.
23%-38% retracement of this upside impulsive wave (from 7893-8389) is placed at 8271-8199 which is the expected range when correction starts.
Wave (5) I have marked is highly extended (projected about 100%) but still there is no sign of reversal. This whole move from 8133-8417 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. 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) 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, 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, 123% projection is placed 8440. But wave (v) is sharper and progressing with gaps followed by range bound consolidation at top so it is difficult to say if wave (v) already completed at 8417 or still in progress.
Fibonacci projection wise, wave (v) rarely extend above 100%-123% but here wave (v) already extended above 100% even with speed and gaps. So, there are possibilities that either 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).
As it is difficult to say if wave (v) is completed, we need to take help of Fibonacci Retracement to get hint of reversal. 38% retracement of whole wave (v) 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 8454-8499 when calculated from today’s low 8382. So, 8454-8499 is the minimum expected upside if wave (v) is not completed yet.
Nifty achieved 8333-8400 range without breaking below 8219 and Nifty proved that we were right in identifying the Leading Diagonal Pattern from 8133-8219. But speed of the whole wave (started from 7893) is still faster and wave is still gaining speed with gaps and closing near high of the day, so there is no confident sign of reversal yet.
Fibonacci Calculations wise, 8454-8499 is the range we can expect on upside and 8344 [38% retracement of whole wave (v)] is the point below which we can think of any reversal and same must be the stoploss for longs. Breaking below 8344 can take Nifty towards 8293-8216 (23%-38% retracement of whole move from 7893-8417).
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. 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 longs can use fresh stoploss of 8343 and 8454-8499 is minimum expected range on upside. Keep strict stoploss for longs. Even if Nifty breaks above 8417 and stay above 8417 till 9:31 AM then fresh longs can be taken using stoploss of 8399 expecting same upside targets 8454-8499. But take fresh longs only if seeing good risk reward, avoid if Nifty already opens gap up or already bounced near target.
- If Nifty breaks below 8343 then shorts can be taken on bounce with stoploss of 8387 expecting downward targets 8293-8216. Exact trade can be decided only after seeing the pattern formed at 8343.
- If Nifty “achieves 8454” and then “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 targets 8380-8344 which further can extend towards 8293-8216. Hold shorts for next day only if Nifty breaks below 8344.
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