Nifty opened mild gap up at 8504 but again failed to sustain at higher levels and trader with negativity for rest of the day. Nifty declined gradually to register day’s low 8400 before closing 51 points down at 8433.
Friday, suggested buying Nifty only if trades above opening price at 9:31 AM (after first 15 minutes) otherwise more decline was expected. Nifty opened at 8504 but failed to trade above 8504 at 9:31 AM and declined till 8400. Nifty 8900-9000 calls bought in light quantity in 45-27 range 2 weeks back is near to Zero and this trade is almost failed. Let’s have a fresh look at latest charts for further scenario.
This report is further update on my previous analysis report in which the possibility of “Triple Zigzag” Correction was explained. Please read this report at Nifty Can Bounce Sharply Above 8968 Without Breaking Much Below 8377
This is hourly time bar chart of Nifty covering decline from 8968 showing the possibility of complex correction “Triple Zigzag” (abc-X-abc-X-abc) pattern.
By casual look, it seems double zigzag (abc-X1-abc-X2) may be already completed from 8968-8736 whereas 3rd and last (abc) cycle may be in progress. 61%-100% projection for last (abc) cycle is placed at 8481-8324 where 8481 is already achieved. But maximum limit for last leg of this Triple Zigzag is up to the lower line joining C1-C2 which is way below 8200.
But there is abnormality in last (abc) leg of this expected Triple Zigzag because wave (c) of last (abc) leg projected more than normal 100%-123% which is explained on next 15 minutes chart.
Other Possibility: But if this decline is not “Triple Zigzag” then we can see a very sharp crash like decline towards 8200 because of repeated overlapping (from previous report dated 02 Nov 16).
Read this explained article to understand everything about “Triple Zigzag Correction”: Triple Zigzag Correction of Elliott Wave Theory Explained by Deepak Kumar
Now, let’s analyze last (abc) leg started from 8736 for more clarity.
This is 15 minutes time bar chart of Nifty covering decline from 24 Oct 2016 which can be last (abc) leg of Triple Zigzag or a progress of downward impulse.
The first impulsive decline from 8736-8550 can be wave (A or 1), next corrective bounce from 8550-8678 can be wave (B or 2) as Simple Zigzag Correction and further wave (C or 3) may be started 8678. I am showing the possibility of both (ABC) and (123) for this decline because last downward impulse started from 8678 projected more than 123%.
38% retracement of wave (3 or C) is placed at 8506 which is the point above which we can think of any reversal whereas Reflex Point (start of wave (5) of (C or 3)) is 8537. So, first upside impulse (fast bounce without 38%-61% correction) needs to be complete above 8537 for 2nd confirmation of reversal. So,
- If this decline from 8736 is (ABC) then we can expect a very sharp bounce towards 8537 because inner wave (5) of (C) is extended and extended wave (5) mostly retraces 100% with speed. And this bounce can further extend towards 8968.
- But if this decline from 8736 is (123) then it needs one more decline of 129-208 points as 38%-61% projection of wave (5). 23%- 38% retracement for wave (4) is 8465-8506 in this case.
And 38% retracement of wave (C or 3), 8506 is the break even point between both these possibilities.
The overall pattern from top 8968 looks corrective because of repeated overlapping of waves with this decline. This corrective pattern can be either Triple Zigzag Correction as explained on chart or some other type of correction which I am not able to identify yet. Overall pattern is following maximum rules of Triple Zigzag but there is abnormality in last leg.
So overall, for 8968 is expected in coming weeks or months but time cannot be predicted. If the pattern completes at “Triple Zigzag” then Nifty can cover whole decline from 8968 within 8-10 sessions but if it is some other type of correction then time cannot be predicted. So we need to wait for reversal pattern before taking any positional entry.
The conditions for Reversal are: –
- If Nifty retrace back above 8506 (38% retracement of wave C or 3) then we can think of any reversal because (4) normally retrace below 38%.
- 8357 is Reflex Point (start of wave (5) of (c)). If Nifty complete first impulse above 8357 then we can be confident of reversal.
- Breaking above upper line of expected Triple Zigzag (shown on hourly chart) straight way from here can further conform this pattern as Triple Zigzag. Provided Price should not break below the line again after breakout.
If reversal has to happen from here then it must be faster and immediate because of extended wave (5) of (c). Otherwise any consolidation below 8506 can give one more decline of 129-208 points as explained above on 15 minutes chart.
For Trading Point of View: –
There are signs of completion of a wave but Nifty closed at lowest levels without showing any reversal pattern. But if reversal has to happen from here then it must be faster. So,
If Nifty trades above opening price at 9:31 AM (first 15 minutes of opening) then one can take risk to buy with stoploss of low (made till 9:31 AM) and manage the trade with stoploss. Otherwise if Nifty break above 8506 then keep stoploss of 61% retracement of whole bounce from low and carry the longs with trailing stoploss. Safe traders can wait for an impulse to complete above 8537 to initiate positional trade.
If someone likes to sell then 8465-8506 is safe range for selling keeping stoploss some points above 8506. This condition can be confirmed after seeing the pattern formed in 8465-8506 range which is possible to see tomorrow only.
8900-9000 Calls bought 2 weeks before are near to Zero, So one can try the luck to hold it till expiry as Nifty can cover the whole decline from 8968 with 8-15 sessions if Triple Zigzag is already completed.
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