Elliott Wave Outlook of Nifty for Gujarat Election Result Day

| December 17, 2017

Nifty opened huge gap up at 10345 and bounced further to register day’s high 10373 but failed to sustain at higher levels and declined back by more than 50 points to register day’s low 10319 and finally closed 81 points up at 10333.

Yesterday, overall outlook was bullish for 10329-10490 as upside target range and 10224 was breakeven point on downside. I suggested holding 10000 Dec Call bought in 10140-10150 range on Thursday using fresh stoploss of 10224 to book profit on Friday. Nifty bounced more than 120 points to register high 10373 and 10000 Dec call bounced from 260 to 424 (160 points) in 2 sessions and closed at 390, it is profit of about 150 point with risk of 20-25 points in 02 sessions. Now, let’s have a fresh look at latest chart for further scenario.

Today I am covering bounce from 28 Sep 2017 low 9687 and earlier wave counts are explained in my previous analysis report Nifty Outlook and Trading Strategy before Gujarat 2017 Election

Elliott wave counts of nifty 5 hour chart

Elliott wave counts of nifty 5 hour chart

This is 5 hour time bar chart of Nifty covering bounce from low 9687 which I marked as start of new upside impulse.

There is no change in wave counts on this chart. There are confusions and low confidence in counts but casually it seems, wave (1) completed from 9786-9945, (2) completed from 9945-9881, wave (3) may be in completed from 9881-10490, wave (4) may completed at 10033 and wave (5) may be in progress.

Wave (4) retraced deeper below 38% retracement placed at 10183 which is the point of confusion. But even if it is not wave (4) then also minimum 10490 is expected on upside because the decline from 10490-10033 is corrective pattern. So, our first target is 10490 in every case and further we can calculate after reaching 10490.

Fibonacci wise, minimum 38%-61% projection for wave (5) is placed at 10339-10529 but end of wave (3) is 10490. So, 10490-10529 is the minimum target range for wave (5).

Now, let’s analyze the progress of wave (5) started from 10033 on lowest possible time frame to see if we can get any hint.

Elliott wave counts of nifty 15 minute chart

Elliott wave counts of nifty 15 minute chart

This is 15 minute time bar chart of Nifty covering bounce from 10033 which I am expecting as progress of wave (5) on 5 hour chart.

It seems wave (i) of (5) completed from 10033-10127, (ii) completed from 10127-10101, wave (iii) may be completed at 10329, wave (iv) may be in completed from 10329-10141 and (v) may be in progress. Wave (iv) retraced deeper than 38% even retraced more than 61% which is the point of confusion. This chart is also showing same story as 5 hour chart.

Wave (v) achieved all its minimum requirements after breaking above 10329 but pattern doesn’t seem completed. So, next 100%-123% projection is placed at 10437-10506.

Within wave (v), it seems inner wave 1,2,3 is completed till 10373 and wave 4 or 5 may be in progress. 38% retracement of progress of wave (v) is placed at 10284. So, 10284 is the immediate breakeven point below which we can think of any reversal.

Minimum 38%-61% projection of wave 5 is placed at 10407-10462 when calculated from 10319, and next 100% projection is placed at 10550 (not shown on chart). So, 10407-10462 is the minimum target range for wave 5 which further can extend towards 10550 (rare possibility to project above 10550) if wave 4 already completed at 10319.

Other Possibility: The correction started from 10329 completed at 61% retracement so there is also a possibility that wave (1) completed at 10329, (2) completed at 10141 and (3) started from 10141. Nifty needs to break above 100% projection 10437 by tomorrow to confirm the same.

And if Nifty achieves 10437 tomorrow to meet the requirement of wave (3) then 10329, end of wave (1) will be the pattern negation point and stoploss for longs.

Conclusion

Nifty already bounced more than 200 points from 10140-10150 range as we expected and our trade of buying 10000 Dec call in 10140-10150 range with stoploss of 10119 gave almost 150 points profit.

Now after combining all the conditions on chart, outlook for Nifty is still bullish as long as trading above 10284 for bounce above 10490 in coming days. 10407-10462 is the immediate targets range on upside and 10490-10550 is good resistance range on upside. Breaking higher above 10550 without any correction is a rare possibility.

So overall, breakeven point on downside and stoploss for longs is 10284, Immediate/Intraday target range is 10407-10462, positional target is 10490, upside resistance range is 10490-10550, breaking higher above 10550 without correction is a rare possibility.

Breakeven Points and Stoploss for longs will change from 10284 to 10329 after break above 10437. We need to keep all these conditions in mind while preparing next trade.

General Outlook for Monday/Gujarat Election Result Day: Charts are indicating levels around 10550 as maximum range for current upside wave. And if Nifty breaks lower below 10284 then it further can decline towards 10141-10033. So in general scenario, Maximum range of movement on Monday we can conclude as 10033-10550 (220 points on upside and 200 points on downside). I am not seeing any big 5%-7% move one sided move in a single session as clients/followers are asking.

It is just general outlook based on my understanding of waves, otherwise anything can happen if the running patterns complete and next waves start in quick time because of huge volatility.

Trading Point of View:

Trading strategy must be Buying on Dips as longs as Nifty is trading above 10284 for upside targets 10407-10462 which further can extend above 10490.

Any decline near 10300-10284 range can be used to buy Nifty using stoploss of 10277 (some points below 10284) expecting immediate upside targets 10407-10462 which further can extend above 10490. Change stoploss to 10329 after Nifty breaking above 10437.

Be cautious in trading ATM or OTM options because premium can decrease drastically after the result is declared. Trade in options (call/put) only if you can good experience and understanding of Options Premium with respect to volatility and if you understand the risk.

Though, it is rare possibility for Nifty to break above 10550 without correction but avoid initiating blind shorts/selling in resistance zone. Because volatility will be high on Monday in view of Gujarat Election Results and expected correction can complete quickly because of volatility (quick up-down swings) for further rise. Those who have good understanding of wave counts should only plan shorts after identification of clear supportive pattern with exact stoploss.

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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"

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