Identification and Importance of Irregular Correction formed on 17 Dec 2015

| December 17, 2015

Nifty opened gap up today at 7883 as expected but started falling after hitting 7800 and declined gradually till 7737. But again Nifty bounced sharply from lower levels to rise more than 110 points from low before closing 93 points up at 7844.

Yesterday I expected that Nifty can bounce minimum till 7803-7845 without breaking below 7733. Nifty achieved 7803-7845 without breaking below 7733 but with different pattern which I explained later in report. Let’s have a fresh look on charts now.

This article just posted explain the formation, advance identification and importance of “Irregular Correction” pattern which formed today just at opening. Before explaining I just posting chart from yesterday’s report.

Nifty Elliott Wave Analysis for 17 Dec 2015

Nifty Elliott Wave Analysis for 17 Dec 2015

This is 5 minutes chart of Nifty which I posted in my yesterday’s analysis report Elliott Wave Targets of Nifty for 17 Dec 2015 after Fed Meet based on which I expected minimum 7803-7845, minimum 38%-61% projection of wave (v). Let’s have a look at today’s move now.

Example of "Irregular Correction" of Elliott Wave Theory

Example of “Irregular Correction” of Elliott Wave Theory

There is a formation of “Irregular Correction” for wave (iv) from 7776-7737, let me explain it first.

Identification of this “Irregular Correction”:

Yesterday we have calculated minimum 38% projection of wave (v) at 7803 and also marked on charts that there is inner wave (1) from 7734-7767 and (2) from 7767-7743 of (v) before closing. So, there were 02 conditions to identify this “Irregular Correction” in advance.

  1. Nifty completed a 3 wave’s move at 7800 but breached 7767 (top of wave (1)) again, thus wave 4 overlapped wave 2 which is not allowed within an impulse. So, this 3 wave’s move from 7734-7780 became waves ABC and upside ABC wave is allowed only in Irregular Correction.
  2. Minimum 38% projection for wave (v) was at 7803 but Nifty declined without achieving it, which indicated that wave (v) still needs to complete above 7803.

Thus both these conditions confirmed Irregular Correction there.

Trading Opportunities:

  1. When Nifty breached 7767 after hitting 7800 and confirmed that it is formation of Irregular Correction, One could sell Nifty as wave (c) of Irregular Correction mostly go till end of wave (a) which was at 7734. Though it was risky as Irregular Correction is always a strong signal for main trend and Nifty could bounce faster.
  2. There was buying opportunity after identify inner wave (v) of (c) of Irregular Correction. One could buy in 38%-61% projection range of wave (v) of (c) with 123% projection at stoploss, this was also risky if you are not able to identify wave (v).
  3. There was clear buying opportunity after we see two impulse waves upwards followed by two downwards correction after hitting 7737 and made wave (1) and (2) followed by inner wave (i) and (ii) of 3 type of pattern. One could buy after breakout above wave (1) with 15-20 points stoploss.

Students/Learners again please read the wave counts and conditions on this chart carefully and try to understand it.

“Irregular Correction” pattern of Elliott Wave Theory is very important as it is the indication of strength in proceeding trend and we often see a great reversal after completion of “Irregular Correction” which Nifty had shown today. Generally wave (b) retrace wave (a) by 38%-61% but when wave (b) go beyond the start of (a) indicates that market participants are overconfident in proceeding trend to there is always a great move after completion of Irregular Correction.

Please read the topic “Irregular Correction” in “Types of Corrections” chapter of book “Practical Application of Elliott Wave Principles by Deepak Kumar” to understand it better.

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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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