Nifty opened flat today at 8629 but declined sharply just after opening and traded with negative bias for rest of the day. Nifty declined almost 80 points before closing 71 points down at 8561 after registering the low of 8552.
In yesterday’s report, expected decline towards 8595-8549 to complete the correction. Overall scenario was “Buying on Dips” and suggested to buy Nifty if get in 8560-8549 range using stoploss of 8529. Nifty declined till 8560-8549 and also bounced 45 points from this range but declined back to close at 8561. Let’s have a fresh look at latest charts for further scenario.
Today I am covering bounce from 26 Dec 2016 low 7893 and earlier wave counts are explained in my “All Time Frame” analysis report Elliott Wave Counts of Nifty on All Time Frames – Long Term Outlook
This is hourly time bar chart of Nifty covering bounce from 26 Dec 2016 low 7893. The whole bounce from low started slowly with overlapping of waves but gained speed as progressed higher. This is the same chart with explanation which I had explained in my yesterday’s report as there is no major change in wave counts on this chart.
Same as I explained yesterday, it seems wave (3) is completed at 8417, wave (4) may be completed at 8327 as “Irregular Complex correction” and wave (5) may be in progress from 8327. Wave (4) looks like an Irregular type of complex correction.
It is not possible to mark inner wave counts on this chart because of the lack of space and for the sake of clarity. Inner wave counts of the move are explained clearly in my earlier analysis report Elliott Wave Analysis and Outlook of Nifty for 25 Jan 2017 Expiry Day. Please read this report carefully if finding it difficult to understand the counts on this chart.
So, normal 38%-61% projection for wave (5) is already achieved after break above 8526-8650 whereas next 100% projection is placed at 8851. Wave (5) entered in extended zone after breaking above 8650.
Though minimum 38%-61% projection of wave (5) is already achieved but pattern of wave (5) doesn’t seem completed. On the other hand, wave (5) I have marked on this chart is extended (projected more than 61%) but we had not seen any sharp fall/reversal after extended wave (5). So may be wave (5) is not yet completed and Nifty may show high above 8672 again.
So, we need to have a separate look at progress of wave (5) on next 15 minutes chart for short term levels and scenario.
This is 15 minutes time bar chart of Nifty covering bounce from 8327 which I am expecting as start of wave (5) on hourly chart.
It seems, inner wave (i) of (5) may be completed from 8327-8403, wave (ii) may be completed from 8403-8351 which retraced exactly 61%, wave (iii) may be completed from 8351-8672 which is highly extended and wave (iv) may be completed at 8552 or still in progress.
23%-38% retracement of wave (iii) (from 8351-8672) is placed at 8596-8549. So, 38% retracement 8549 is the point below which we can think of any reversal and same may be referred as the stoploss for existing/positional longs. And Nifty can bounce again from 8596-8549 range for high above 8672 if I am right at identifying the pattern.
If we look at progress of wave (iv) started from 8672, it seems wave (a) and (b) is completed and wave (c) may be in progress from 8662. And within wave (c), it seems inner waves 1, 2, 3, 4 are completed and last wave 5 may be completed at 8552 or still in progress. Normal 38%-61% projection for wave 5 of (c) is placed at 8561-8535 where minimum 8561 is already achieved and 100% projection is placed at 8495 which is rare.
Now, if wave (iv) is already completed at 8552 then minimum 38%-61% projection for wave (v) is placed at 8583-8765 which is the minimum expected target range if I am right at identifying the pattern, otherwise minimum 8672 is expected.
Nifty bounced sharply from 8327 and wave (5) I have marked on hourly chart is extended (projected more than 61%) but we had not seen any sharp fall/reversal after extended wave (5). So may be wave (5) is not yet completed and Nifty may show high above 8672 again.
8549 is the point below which we can think of any reversal and same must be the reference point to decide stoploss for longs. But tomorrow is budget day so waves can retrace or project abnormally.
For Trading Point of View:
Overall scenario is still “Buying on Dip” and bounce towards 8672-8765 is expected as long as Nifty is trading above 8549. So, longs taken today in 8560-8549 range can be hold with revised stoploss of 8519 (30 points below 8549) expecting same upside targets 8672-8765. Placed stoploss lower than 38% because of huge volatility expected in view of budget tomorrow.
Trade in light quantity with strict stoploss because wave may have abnormal projections/retracement because of budget.
Even if Nifty breaks 8519 and stoploss for longs triggers, I can’t suggest any trade for selling because I am not able to see any confident pattern for big reversal.
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