Fresh Outlook of Nifty after Small Crash of 21 Sep 2018

| September 22, 2018

Nifty opened higher at 11272, bounced further to register day’s high 11346 and declined back by about 480 points from day’s high to register day’s low 11866. But Nifty bounced back again by more than 300 points to register 11191 and closed 91 points down at 11143.

Yesterday, there was conflict within the patterns and I didn’t give any exact overall outlook. But 11286 was Intraday/very short term breakeven point and Nifty was expected to bounce towards 11410-11523 if trades above 11286 for 15 minutes, otherwise a decline for new low was expected.

Trading strategy was to buy Nifty if break and stay above 11286 (in 11286-11260 range) for 15 minutes using exact stoploss of 11257 expecting bounce towards 11410-11523 in coming days. Trade was activated as Nifty traded above 11286 for 15 minutes and also decline towards buying range 11286-11260, but it declined further to trigger stoploss of 11257 and crashed further by 400 points.

Now, let’s have a fresh look at latest charts for further scenario.

This analysis report is covering move after 9951 and earlier wave counts are explained in my last “All Time Frames” analysis report Fresh Elliott Wave Analysis of Nifty on All Time Frame dated 03 Jun 2018.

Elliott wave analysis of Nifty on daily chart

Elliott wave analysis of Nifty on daily chart

This is daily time bar chart of Nifty covering bounce after low 9951 which I marked as start of wave ‘v’ on daily chart in my last “All Time Frames” Report.

Earlier I was marking wave (1) completed at 10929, (2) completed at 10417 and wave (3) in progress. And further, inner wave (i) of (3) completed at 10893, (ii) completed at 10557 as Double Zigzag correction, wave (iii) completed at 11760 and wave (iv) in progress.

But both wave (1) and (i) are overlapped on Friday and there is no sign of any other pattern on higher time frames. So, we need to ignore this move for time being and need to concentrate on decline started from all time high 11760 to calculate further move.

So, let’s analyze the decline started from 11760 to check its pattern.

Elliott wave analysis of Nifty on 30 minutes chart

Elliott wave analysis of Nifty on 30 minutes chart

This is 30 minutes time bar chart of Nifty covering decline after 11760 which I am expecting analyzing independently because there is bit confusion on higher time frames.

This decline looks like a 3 wave’s move with wave (A or 1) completed from 11760-11269, wave (B or 2) completed from 11269-11523 and wave (c or 3) completed from 11523-10866.

Inner wave (v) of (C or 3) started from 11346 is highly extended, so Nifty must bounce sharply to touch 11346 if it is wave (C) completed at 10886. If Nifty consolidates below 10346 for couple of days then this decline started from 11523 can be confirmed as wave (3) and we can expect one more decline for new low as wave (5).

38% retracement of wave (C or 3) is placed at 11116 which is already broken and Nifty closed above it. This condition is giving confidence for bigger reversal for new high.

So, let’s analyze the pattern of bounce started from low 10886 to get further idea.

Elliott wave analysis of Nifty on 5 minutes chart

Elliott wave analysis of Nifty on 5 minutes chart

This is 5 minutes time bar chart of Nifty covering bounce from 10866 which I am analyzing independently. It is difficult to count inner waves because move is very steep but we can observe a sharp Impulsive bounce from 10866-11191 followed by (abc) correction (almost 61%).

So, we can assume wave (1) completed from 10866-11191, (2) completed from 11191-11008 which retraced by short of 61% and wave (3) may be in progress. 61%-78% retracement of wave (1) is placed at 10990-10935 and same is short term support.

Within wave (3), it seems inner wave (i) or (ii) in progress. 61%-78% retracement of progress of wave (i) is placed at 11072-11044 and same is immediate support.

If it is really wave (1) completed from 10866-11191 then Nifty must bounce for new high above 11760 because if wave (1) is of 325 points then whole Impulse can be expected thrice of wave (1), means whole impulse can be expected of 975 points at least.

On the other hand, wave (1) is faster, so we can expect sharp bounce because next wave (3) is known to be faster with gap openings.

Conclusion

Let me highlight some important observations: –

  1. The decline from 11760-10866 looks like a 3 wave move and breakeven point 11116 is broken. Even Nifty closed above breakeven point and this condition is giving confidence for bigger reversal for new high.
  2. Inner wave (v) of (C or 3) started from 11346 is highly extended, so Nifty must bounce sharply to touch 11346. Within bounce from 10886, we are expecting wave (3) in progress and wave (3) is also known to be faster and larger. So, Nifty need to bounce sharply towards 11346 otherwise any delay can initiate further fall.
  3. Fibonacci calculations wise, 11072-11044 are immediate support and 10990-10935 is short term support.

Overall, Nifty is indicating reversal for new high but it must touch 11346 with speed, otherwise any consolidation below 11346 for couple of days can initiate further fall for new low. On downside, 11072-11044 is immediate support and 10990-10935 is short term support.

We need to keep all these conditions in mind while planning/managing trades.

Trading Points of View:

  1. Nifty is in positive zone and 11072-11044, 10990-10935 are supports. Trading strategy is “Buying on Dips” but stoploss will be huge. So, positional traders can plan their own trade if get low risk opportunity, I am not comfortable with big stoploss.
  1. 11116 is breakeven point for where a good move either side is possible. Nifty is expected to bounce sharply towards 11346-11760 or decline towards new low below 11866 in quick time. So, hedge traders can plan hedge trade if get Nifty near 11116 based on their trading preferences.
  1. Small traders can Buy 11600 Call or Oct expiry in 60-40 range using stoploss 27 expecting bounce towards 11340-11760 in coming days.

These are low risk trading strategies I can suggest, otherwise traders can plan their own trade based on the conditions explained above.

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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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