Elliott Wave Outlook of Nifty After Break Above 8274 – Example of Leading Diagonal

| January 6, 2017

Nifty opened gap up at 8226 and traded with strength for rest of the day, Nifty bounced gradually to register day’s high 8282 before closing 83 points up at 8273. Nifty also achieved long awaited 8274 sharply with speed which I expected in previous medium term report of 27 Dec 2016.

Yesterday, I expected either a sharp bounce of 70-110 points or a decline towards 8141 if Nifty fails to break sharply above 8219-8233 in first hours. Nifty opened above 8219 breached 8233 just after opening and further bounced to register day’s high 8282.

Today I am covering declining from 10 Nov 2016 high 8598 and earlier wave counts are explained in my previous analysis report Further Elliott Wave Updates of Nifty after Break Below 7916.

02-jan-2017-1

This is hourly time bar chart of Nifty covering decline from 10 Nov 2016 high 8598 which I have marked as start of wave (C) on daily chart in my earlier analysis report. This is the same chart with explanation which I had explained in my last report because there is no major change in wave counts on this chart.

As I expected in my analysis report of 27 Jan 2016, it seems an impulse is completed from 8598-7893 with sharper wave 1 and 3 followed by normal wave 5 (less than 61%) and Nifty also bounced sharply from lower levels. This impulse I am expecting as some sort of wave (C).

38%-61% retracement of this impulse is placed at 8162-8328 whereas 38% retracement at 8162 is already achieved. And Nifty also breached expected 8274 and next 61% retracement is 8328.

Now, we need to analyze the bounce from 26 Dec 2016 low 7893 on separate lowest possible time frame chart for short term scenario.

Elliott Wave Counts of Nifty on 15 Minutes chart

Elliott Wave Counts of Nifty on 15 Minutes chart

This is 15 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.

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. 38%-61% projection for wave (5) is placed at 8249-8309 whereas 8241 is already achieved. (There are repeated Irregular Corrections in this whole bounce).

Other Possibility: It may also be inner wave (iii) of (3) completed at 8183 and inner wave (iv) of (3) in progress from 8133 as overall bounce from low 7893 still seems faster. So, we will let this impulse started from 8133 complete first and further will look if it was wave (v of 3) or (5).

And within inner wave (5), it also seems progressing as impulse with inner wave (i) as Leading Diagonal Triangle. So, let me explain the possibility of Leading Diagonal Triangle separately on 5 minutes chart.

Example of LD on 5 minutes chart

Example of LD on 5 minutes chart

This is 5 minutes time bar chart of Nifty covering move from 02 Jan 2017 low 8133 which I am expecting as start of wave (5) and I have explained the possibility of Leading Diagonal Triangle on this chart with inner wave counts.

The first bounce from 8133-8219 with overlapping of waves looks like “Leading Diagonal Triangle” (LD) because this wave is following all the following rules of LD: –

  1. The structure of pattern is 5-3-5-3-5. Wave inner waves (i), (iii) and (v) are impulsive (5 waves) and wave (ii) and (iv) are correctives (3 waves) which makes it 5-3-5-3-5.
  1. Wave (iv) is overlapping (ii).
  1. In this pattern wave (iii) is smaller than (i) but wave (v) is smaller than (iii) and overall wave (i)>(iii)>(v), means following the rule that wave (iii) can never be shortest wave. Wave (v) need not to be extended as pattern is (i)>(iii)>(v) but wave (v) achieved minimum 38% projection. [Normally wave (v) of LD and ED needs to be extended if wave (iii) is more than (i)].
  1. Lines joining inner waves (i)-(iii) and (ii)-(iv) are not disturbed anywhere in the pattern before its completion and line joining (ii)-(iv) is broken after completion of LD.

So, this move from 8133-8219 is following all the rules of Leading Diagonal and if this move is really LD then it must be wave (1) because LD can happen only within wave (1). And further if it is wave (1) than Nifty needs to complete wave (3) and (5).

I expected a sharp bounce of minimum 70-110 points because of overlapping pattern formed at top but possibility of the LD didn’t clicked in mind, may be because of lack of concentration as I have seen this LD type of pattern after a very long time in Nifty.

Many of subscriber and followers ask how a Leading Diagonal looks like in real time. This chart is the real time example of Leading Diagonal following all the rules explained with inner wave counts. Even if this pattern is not actually LD, then also this pattern looks exactly like I explained on this chart, it is perfect example to note down.

Now waves wise, it may be wave (1) completed from 8133-8219 as LD, Wave (2) may be completed from 8219-8181 and wave (3) may be in progress from 8181. Wave (3) seems within its inner wave (v).

38% retracement of wave (3) is placed at 8233 which is the point below which we can think of any reversal and same must be the stoploss for positional/fresh longs. 38% retracement 8233 is calculated as the retracement of wave (3) progressed till now from 8181-8282, which need to be calculated fresh from new high when Nifty breaks above 8282.

And we can see more upside towards 8309-8328 as wave (4) downwards and (5) upwards is still pending within this impulsive wave started from 8133.

Conclusion:

Overall Nifty bounced sharply from 7893 as expected in my last medium term analysis report of 27 Dec 2017 and first achieved 8110 with speed [100% sharp retracement of wave (v) of (5)] and then achieved 8174 yesterday but still have possibility of some more upside towards 8309-8328.

For short term, the is possibility of Leading Diagonal from 8133-8219 so we can expect an impulse (5 waves) to complete from 8133 and wave still looks within waves (3) whereas wave (4) and (5) seems pending.

38% retracement of wave (3) progressed till now is placed at 8233 which must be stoploss of positional/fresh longs. 38% retracement 8233 is calculated the retracement of wave (3) from 8181-8282, which need to be calculated from new high when Nifty breaks above 8282. So any 23%-38% retracement of wave (3) started from 8181 can be bought again with stoploss some points below 38% retracement for target of 38%-61% projection of wave (5).

For Trading Point of View:

  1. Stoploss for existing longs as of present scenario must be 8233 which must be moved higher at 38% retracement of wave (3) (38% retracement of move started from 8182 to new high), minimum targets expected are 8309-8328.
  1. Any 23%-38% retracement of wave (3) started from 8181 can be bought again with stoploss some points below 38% retracement expecting minimum target of new high of this rally, generally targets are 38%-61% projection of wave (5) of the impulse started from 8133.
  1. If Nifty breach 38% retracement of wave (3) started from 8181 and pattern of retracement is impulsive than next strategy may be buying on dips but trade can be decided after seeing the pattern of actual decline.

Alert: Any trade on short side must be taken after conditions fulfils and with strict stoploss because overall it is wave (3) in progress and there is no maximum limit for extension of wave (3) or inner waves of wave (3).

Note for Learners: Please read the formation of Leading Diagonal on 5 minutes chart carefully with explanation explained below the chart. Read every point carefully and note down for future study.

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Category: Nifty

About the Author ()

Deepak Kumar is an independent Technical Analyst, regular practitioner and Trainer of Elliott wave theory applying Elliott's Wave Principles on Indian Markets successfully since 2011 and made many accurate predictions. He is also the author of book "Practical Application of Elliott's Wave Principles by Deepak Kumar"