Elliott Wave Outlook of Nifty for 22 July 2016 Onward

| July 21, 2016

Nifty opened gap up at 8582 but failed to sustain at higher levels and traded with weakness for rest of the day. Nifty declined gradually to register day’s low 8503 before closing near low of the day at 8510.

Yesterday, I suggested stoploss for any existing longs (not fresh long) at 8542. I didn’t suggested any trade for buying as minimum targets was 8594 only and suggested to Sell Nifty (for aggressive traders only) if even touch 8541 with stoploss of 20-25 points and manage the trade with trailing stoploss. Nifty declined about 40 points after touch of 8541 without hitting stoploss. Let’s have a fresh look at latest charts for further outlook.

Today I am covering move from 29 Feb 2016 low 6825 and previous waves counts are explained in my all time frames report Elliott Wave Counts of Nifty for All Time Frames as on 18 July 2016.

Elliott wave analysis of Nifty for 22 July 2016

Elliott wave analysis of Nifty for 22 July 2016

This is daily time bar chart of Nifty covering move from 29 Feb low 6825. This is the same chart with explanation which I explained in my last report as there is no change in wave counts on this chart.

By casual look it seems an impulse completed from 6825-7992 which could be wave (A or 1), decline 7992-7678 may be wave (B or 2) and wave (C or 3) may be in progress from 7678.

Minimum 61% projection for wave (C) is placed at 8399 which is already achieved and minimum 100% projection for wave (3) is placed at 8845. Inner wave (C or 3) seems within its inner wave (3) and we can expect a 23%-38% correction after completion of wave (3) started from 7715. 23%-38% retracement from 8394 is placed at 8386-8258.

So, we need to look at very last upside impulse started from 8287 which I expecting as start of inner wave 5 of (v) of (3) of (C or 3). Let’s see if this impulse is completed or not.

Elliott wave analysis of Nifty for 22 July 2016

Elliott wave analysis of Nifty for 22 July 2016

This is 15 minutes time bar chart of Nifty covering bounce from 08 July low 8287 which I am assuming as progress of wave (5) till now.

Earlier I was expecting as end of wave (3) at 8550 but now there is a possibility that wave (3) completed at 8594 and wave (4) may be in progress or already completed at 8476. I am seeing this possibility because the decline from 8594-8476 is exactly 38% retracement of bounce from 8287-8594 and even the pattern of the same decline looks corrective rather than progress of impulse. The decline from top 8594 looks like consolidation till now and pattern looks like corrective which is either already completed at 8476 as Simple Zigzag or may be still progressing as Complex correction.

If it is wave (4) completed at 8476 then minimum 38%-61% projection for wave (5) is placed at 8594-8665.

So, we need to look at decline from 8594 to conclude further short term scenario and to prepare next trading plan.

Elliott wave analysis of Nifty for 22 July 2016

Elliott wave analysis of Nifty for 22 July 2016

This is 5 minutes time bar chart of Nifty covering decline from 15 July 2016 high 8594.

If I try to mark very first decline from 8594-8510 as impulse then its inner waves has not achieved minimum Fibonacci projections. So, this decline from 8594-8510 looks may be (abc) rather than impulse.

Then next bounce from 8510-8587 also looks like a (abc) wave and further decline from 8587-8476 can be impulse but inner wave (4) or (2) are almost overlapped. And next bounce from 8476-8585 again looks like impulse followed by a decline.

Overall the whole pattern from top 8594 is complex in nature which looks like a corrective wave rather than impulse till now and a bounce above 8594 is still possible. Nifty needs to fall very sharp from here to gain the personality of impulse otherwise we can witness an upside trigger very soon.

Other rare possibility: If the decline from 8594 is repeated downward impulses followed by upside correctives then Nifty can decline very sharply from here just like crash. But Nifty needs to fall very sharply from here otherwise consolidation for 1 more day above 8476 will negate this possibility.

So, we need to plan next trade keeping in mind all the possibilities explained above. There is 3 wave’s move at today’s low which I have marked on chart as waves (a or 1), (b or 2) and (c or 3). So, stoploss for any existing shorts can be end of wave (a or 1), 8526 based on which we can plan next trading strategy.

Conclusion:

Same as I explained yesterday, Nifty declined about 120 points from high but still there is no sign of reversal. The decline from 8594 looks like a corrective pattern rather than impulse till now, so new high above 8594 is possible sooner or later.

For short term or tomorrow, bounce above 8594 is possible but conditions are not giving exact bottom range or exact stoploss for longs. And there is limited scope of downside as of now.

Any big fall can happened only if the decline from top 8594 is wave (1), (2) and inner wave (i) and (ii) of (3) as explained in “Other rare possibility” above. Nifty can even crash in this case by 300-500 points but it is a rare case and Nifty must decline sharply from here without any delays.

For trading point of view, stoploss for any existing shorts must be 8526. Even Nifty can be bought if even touches 8526 with 20-25 points stoploss for minimum target 8555 which can further extend to 8594. This trade needs to be managed with trailing stoploss once Nifty moves above 8555.

If Nifty decline straightway and break below 8476 then Nifty 8700-8800 Aug Calls can be bought with initial stoploss of 8399 and further I will update in next analysis reports. Trade must be by means of options/calls only as stoploss is big as there is a possibility of sharp decline also. Buy calls in such quantity so that you can bear loss even these calls decline by 50%.

Trade in light quantity as per risk tolerance and follow strict stoploss to avoid heavy losses if we prove wrong in analysis.

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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"