Nifty opened huge gap down at 8542 and traded with negative bias rest of the day. Nifty decline about 120 points from previous close to register day’s low 8504 before closing 112 points down at 8514.
Yesterday, there was no trading strategy suggested and only 8900-9000 Calls in very light quantity was suggested to hold without stoploss. And a very sharp decline towards 8492-8448 or sharp bounce towards 8780-8834 was expected. Nifty gave a very sharp decline towards 8492 and also supported the possibility of “Triple Zigzag” Pattern which I explained in my last report. Let’s have a fresh look at latest charts for further scenario.
This report is continuation of my previous analysis report in which the possibility of “Triple Zigzag” Correction was explained. Please read this report at Nifty Elliott Wave Analysis and Outlook for 01 Nov 2016 Onward.
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.
It seems double zigzag (abc-X1-abc-X2) is already completed from 8968-8736 whereas 3rd and last (abc) cycle is in progress. 61%-100% projection for last (abc) cycle is placed at 8481-8324 whereas maximum limit for last leg of this Triple Zigzag is up to the lower line joining C1-C2 which is somewhere below 8200.
And within last (abc) cycle started from 8736, it seems waves (a) and (b) are completed and last wave (c) in progress. Normal 100%-123% projection for wave (c) is placed at 8492-8448 and next 161% projection is placed at 8377 which is rare case.
This whole decline is following maximum rules and structure of “Triple Zigzag” Correction. And if the patterns and wave counts I have marked are correct then we see a very sharp Non-Stop rally for 8968 after completion of this Triple Zigzag somewhere is 8492-8377 range.
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.
Read this explained article to understand everything about “Triple Zigzag Correction”: Triple Zigzag Correction of Elliott Wave Theory Explained by Deepak Kumar
Now, we need to identify the completion of very last wave (c) of last (abc) cycle started from 8678.
This is 5 minutes time bar chart of Nifty covering decline from 30 Oct 2016 high 8678 which I am expecting as start of wave (c) of last (abc) cycle of Triple Zigzag Correction and this wave (c) must complete as a clean impulse. And identification of completion of this impulse is very important because completion range of this impulse can give a very good low risk trading opportunity for a big rally if happens.
It seems wave (1) and (2) are completed and wave (3) is in progress from 8669. And with in wave (3), it seems wave (i), (ii), (iii) and (iv) are completed and (v) is in progress from 8648. Minimum 38%-61% projection for wave (v) of (3) is placed at 8486-8449. So, wave (4) and (5) still seems pending.
Point for Observation: This wave (c) needs to complete immediately without any delay if it is of “Triple Zigzag” because last wave (c) of last (abc) cycle of Triple Zigzag Correction is mostly faster which have tendency to scare the traders followed by sharp rise. This personality of last wave (c) of Triple Zigzag can help to identify the end of correction if we are right.
For medium to Short Term, there is a possibility of “Triple Zigzag” correction for the decline from this year high 8968 which seems very near to its completion if I am right at identifying the pattern. Estimated range for completion of this Triple Zigzag Correction is 8486-8377. And if I am right at identifying the pattern then Nifty can bounce sharply towards 8968 after completion of this “Triple Zigzag” Correction.
For Short Term, Nifty can give one more decline towards 8486-8448 to complete wave (4) and (5) where we can take systematical longs with proper risk management.
For Trading Point of View: –
8900-9000 Nov calls in light quantity if already holding from 45-25 can still be hold with stoploss because if the pattern I am identifying is correct then nifty can bounce towards 8968 in shorter time. And these 8900-9000 calls planned in very light quantity such that we will be comfortable with loss even of calls becomes 0 because a complex correction type of pattern was expected.
For short term, avoid fresh shorts for time being because if “Triple Zigzag” is near its completion then it may not give chance to exit the shorts. Further the pattern of last wave (c) is not yet completed but near to completion, so we can plan positional trade with small stoploss once pattern is completed. Indicative stoploss for longs is 8377 as present condition but actual stoploss can be calculated after completion of wave (c).
Must Read for Readers:
This possibility of “Triple Zigzag” correction and sharp rise for 8968 I have mentioned because it is the only pattern which I am able to identify for this decline from 8968 otherwise I am not able to identify any other pattern. And it is not necessary that whatever I am seeing is right or will happen. It is just the honest analysis based on my understanding of waves without considering any other technical or fundamental factor.
So, don’t be greedy. These types of conditions or opportunities comes rarely where we can take the risk of 5%-10% of our capital in trading and 20%-40% capital in short term Investment for quick 30-50% gains. Trading is a game of probability and risk reward and we have to take risk when we are seeing rewards. Personally I never afraid to take risk in such conditions, earlier I identified 2 big “Triple Zigzag” corrections and caught 500-600 points move.
Taking risk doesn’t means taking Nifty Calls with 50%-100% of capital (which most people do and lose). If you are taking options then it should not be more than 5%-10% of your trading capital so that you can hold until the conditions favors. And if taking futures or Stocks then you can deploy 20%-40% capital systematically with proper risk management so that you won’t lose more than 5% of the capital if trade goes wrong.
These points I wrote especially because many traders take huge positions by their own without stoploss or risk management and ask me for remedies. There is only one remedy for a wrong trade which is first Stoploss otherwise there is no remedy. So, this analysis report is not a recommendation for trading or a trading call, I prepared it just to show my students a live example of Triple Zigzag Correction if it really happens.
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