Is Nifty Heading for New High or New Low – Elliott Wave Analysis

| October 24, 2015

“Is Nifty heading for new high or new low” or “ what is the whole corrective pattern going on from 9117” are the queries I am getting from subscribers as well as students. Though I tried to explain it in my last weekly analysis report published on 19 Oct 2015 but I think I failed to make them understand as still I am getting same question as well as suggestions about pattern.

So, today I tried to explain all the possibilities separately on same charts one by one. And I need to analyze Nifty wave counts from all time high 9117 to get answer of these questions. I had given three possibilities for this whole pattern started from 9117 in my last report Nifty Elliott Wave Analysis for the Week Commencing 19 Oct 2015. These were:

  1. Either this correction already completed at 7541 as “Double Zigzag” as (abc-x-abc). 9117-7997 as 1st abc, 7997-8655 as wave ‘X’ and 8655-7541 as 2nd “abc”. Nifty can go for new high in this case but step by step.
  1. Or this correction may turn into triple zigzag where (abc-x-abc) is already completed and (–x-abc) is still pending. Nifty can rise till 8450-8550 (Minimum till upper blue line) in this case followed by sharp decline for 7541 and below. This possibility will be negated after break above 8655.
  1. Or this is a normal ‘abc’ correction going on and Nifty can go below 7541 again but this possibility will negate after break above 8322.

Out of these three possibilities, possibility no. 3 has been negated at Nifty broke 8322 on Friday. So, let’s   analyze what is there on latest charts.

Some Subscriber are suggesting that the whole correction may be already completed at 7541 as “Triple Zigzag” as I was expecting a couple of month back and explained in analysis report Nifty can Decline below 7940 in August Expiry – EW Analysis on 28 July 2015. Please read it carefully. Let me show you same pattern on fresh chart.

Elliott Wave Analysis of Nifty

Elliott Wave Analysis of Nifty

This is latest daily time bar chart of Nifty covering move from all time high 9117.  If someone seeing this pattern as completion of Triple Zigzag Correction (abc-x-abc-x-abc) then it is not valid. There is a mandatory rule for “Triple Zigzag Correction” that line joining by wave X1 and X2 can never be disturbed before completion of pattern.   Breakout happens only after completion of pattern and price never enter that pattern again after breakout.

X1 completed here at 9117 and X2 completed at 8655 but line joining X1 and X2 is disturbed later when Nifty bounced again to 8621 but not above 8655 (shown in red circle).

So, this chart is giving the surety that a “Triple Zigzag” correction is not completed yet or it is not Triple Zigzag.

And this is not even Simple Zigzag (abc) as last down leg from 8655-7941 is three wave’s move (abc) rather than an Impulse, whereas wave (c) must be impulse only. And there is no possibility for this decline from 8655 to be an impulse now after break above 8322 on Friday.

But this pattern has possibility to be in continuation of “Triple Zigzag Correction” explained on next chart.

Elliott Wave Analysis of Nifty

Elliott Wave Analysis of Nifty

This is same daily time bar chart covering move after all time high 9117.  There is a possibility that a Triple Zigzag Correction is still running as shown on chart where,

  1. First ‘abc’ may be completed from 9117-8470
  2. Link wave (X1) may be completed from 8470-9117 is Irregular Wave
  3. 2nd ‘abc’ may be completed from 9117-7997
  4. And wave (X2) is still running in very long, Irregular and Complex pattern which needs to complete at or above “upper red line” as shown on chart. Upper red line is around 8380-8400 as of now.

The logic behind this wave (X2) to complete at or above that upper line is only that there should not be any disturbance if we draw line joining wave (X1) and (X2).

The only thing we can conclude from this possibility is that Nifty needs to break that upper line at least  which is around 8380-8400 as of now and there can be a fast and sharp fall for new low below 7541 after completion of (X2) as last and 3rd leg of Triple Zigzag is always destructive.

Now, let me show another possibility for new high:

Possibility for New High:

Possibility for new high in this upside wave (started from 7541) arise only if this whole correction started from 9117 is completed at 7541 and there is only 01 probable condition for that which I explained on next chart.

Elliott Wave Analysis of Nifty

Elliott Wave Analysis of Nifty

This is again the same daily time bar chart covering move after all time high 9117. The possibility for a new high arises only if Nifty had already completed whole correction at last low 7541 as “Double Zigzag” (abc-x-abc) with:

  1. First (abc) cycle from 9117-7997
  2. Link wave (X) from 7997-8655
  3. And 2nd (abc) cycle from 8655-7541

But Double Zigzag pattern is not always reliable and there is always lack of confidence because it can turn to Triple Zigzag anytime. We can be confident on Triple Zigzag and Simple Zigzag but there is always a lack of confidence in “Double Zigzag”.

Even if the correction is already completed at 7541 as “Double Zigzag” then also the upside wave for new high may not go in straight line as inner wave (i)  of upside wave is comparatively smaller and didn’t broke reflex point. So, Nifty will give frequent chances to trade with this upside wave if it is going for new high.

Scope of Triple Zigzag in this chart:

Nifty needs to touch or break “upper blue line” (around 8450) at least as shown on chart even if this “Double Zigzag” to turn into “Triple Zigzag” because wave (X2) need to complete above that upper line. Possibility for Triple Zigzag in this pattern will be negated if Nifty breaks above 8655.

Conclusion:

Practically there is no confident conclusion from this whole report which can help us in making real trading decision. If I analyze all the conditions then it suggests the following:

  1. Minimum 8380-8450 we can expected in this upside move before any big correction. Means we can trade on long side whenever get opportunity till we are below 8380.
  1. Just have patience for any positional trades until we see any clarity for one sided possibility and concentrate on inner wave’s pattern only till then.
  1. Avoid holding any unprotected heavy long positions overnight after 8380 as the fall can be so destructive if this pattern turns into Triple Zigzag that your whole capital can wash off in a week.
  1. Never be overconfident if someone says that new Bull Run has started. Always keep the possibility for a decline below 7541 in little corner of your mind. Means avoid any big over-confident positions on long side but don’t take it as sure shot.
  1. Trade on long side but try to be limited to Intraday only or in light quantity so that you can bear the loss in case of huge gap down.
  1. We can’t practically figure out how much time Nifty will take to show clarity of bigger direction but it may show when the actual time comes.

If we look at the whole pattern from top then this is the most complex pattern till now. Every inner wave is either Irregular or Highly Extended or Deeply Retraced. It is the personality of a Complex Correction which is the toughest pattern to identify in Elliott Wave Theory. I expected this as a Complex Correction in April 2015, it is 6 months now and still Nifty is coming with a new inner pattern every week and still there are possibilities for Complex Correction. That’s why I always suggest focusing on inner waves only till we identify a confident completion and we succeeded in identifying inner patterns most of the time.

Updates on inner wave counts and smaller wave patterns with stoploss will be provided separately in Daily Analysis Reports.

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My Personal View:

There more probabilities for a low below 7541 rather than for new high as per present conditions but these conditions can change later. A probability for low doesn’t means that I am sitting with shorts. It only means that I am still cautious and will trade positional only where there is confidence.

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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"