Nifty opened Gap down today and bounced till 7843 but failed to sustain at higher levels and declined more than 100 points from previous close before closing 105 points down at 7831. 7825 was low for the day.
Yesterday I suggested concentrating on Selling on bounce for today with strict stoploss of 7860 for minimum targets 7804-7769 where we need to book profit or trail stoploss and Nifty have possibility to break below 7714 also because of “Irregular Correction” type of pattern at bottom. Nifty declined more than 100 points without touching 7860.
Today I am covering wave counts from last week high 8336 and read my previous report Most Probable Elliott Wave Counts of Nifty as on 02 Nov 2015 for previous wave counts. This 15 minutes chart below (with explanation) is exactly as I explained in yesterday’s report as there is no change in this chart yet.
This is 15 minutes time bar chart of Nifty covering move after high 8336. If we look casually at this chart then, may be wave (1) completed from 8336-7997, wave (2) completed from 7997-8116, wave (3) completed from 8116-7771, wave (4) completed from 7771-7937 and wave (5) started from 7937.
But there is lack of clarity in above counts as I explained below:
- Wave (2) is not even 38% and inner wave (c) of (2) is not even 100% of (a). These conditions are possible but rare.
- Wave (3) is just 100% of (1), just achieved its minimum projection. Wave (5) should be extended in this case which needs to project above 61%.
- Wave (4) also not clear as inner wave (c) is not 100% of (a).
Though, all above mentioned conditions are following all EWT rules but with rare conditions. So, we must be cautious whenever there are rare conditions.
But if this pattern is right then wave 5 needs to project minimum 61% which is placed at 7587 whereas next 100% projection is placed at 7372.
Or this decline from 8336 may be progressing as ABC pattern as shown on chart with blue counts. Wave (C) already achieved normal projection of 100% after breaking 7777 whereas 123% is placed at 7696. Nifty needs to bounce above 8336 in this case. It is just a possibility to keep in mind.
Let’s have a separate look on bounce from 16 Nov low 7714 on 5 minutes chart:
This is 5 minutes time bar chart of Nifty covering move after Monday’s low 7714.
As I mentioned yesterday, it seems an impulse is completed from 7714 to 7860 as shown on chart. This upside impulse may be inner wave (i) or (a) of upside move or inner wave (c) of Irregular Correction. There is an Irregular Correction type of pattern at bottom (7714) as shown on chart. So, upside impulse from 7714-7860 may be inner wave (c) of this “Irregular Correction” in this case and we can see a decline below 7714 again.
Now, the decline from 7860 look like an impulsive move till now which is somewhere within inner wave (iv) of 3 as shown on chart, so may be more downside is pending. 23%-38% retracement of this decline is placed at 7756-7776.
“There is a “3-3-5 Flat Correction” pattern for inner wave (iii) of (3) downwards which was a great low risk selling opportunity. Please look at the small pattern marked within red circle. I have explained this pattern closely on separate 1 minute chart at last.”
So, we can expect a minimum bounce till 7756-7776 where we need to see pattern again. Stoploss for existing shorts must be some points above 7776. We can’t calculate downwards targets unless we see the bounce for wave (iv).
Chances for any big crash are rare as inner wave (1) of downwards move is comparatively small. And Nifty can bounce from present levels also if the wave 1,2 and 3 I have shown are actually waves a, b and c.
So, let’s have idea of minimum possible downside levels from 15 minutes chart.
This is 15 minutes time bar chart of Nifty covering move after 8816. This chart I have shown just for calculation of minimum possible downside levels if decline started from 7860 is really impulsive. For minimum targets, if we take wave (3) completed at 7714 and wave (4) completed at 7860 then wave (5) can project minimum 38%-61%. So, minimum downside we can expect 7706-7611.
Perfect Example of “3-3-5 Flat Correction” – A Low Risk Selling Opportunity:
Today there was a perfect “3-3-5 Flat Correction” in 7815-7834 range as I market on 5 minutes chart above within red circle. I explored this pattern on separate 1 minute chart for better understanding.
This is 1 minute time bar chart of Nifty covering today’s move between 7815-7834 showing “3-3-5 Flat Correction” Pattern. Please look at the counts on chart carefully.
3-3-5 Flat Correction: A correction where wave (B) retrace almost 100% of wave (A) is called “Flat Correction”. Means wave (B) ends almost near to start of (A). I call it “3-3-5 Flat Correction” because wave (A) in this correction is always 3 waves (abc), wave (B) is always 3 waves (abc) in any correction and wave (C) is always 5 waves (impulse). And it makes a Flat Pattern with 3-3-5 structure. So, we call it 3-3-5 Flat Correction.
This Flat Correction Pattern is always strong for proceeding trend, means we can expect a strong move in main trend after completion of this correction.
Here in this pattern,
- Wave (A) is 3 waves (abc) from 7815-7829
- Wave (B) is 3 waves (abc) from 7829-7815, wave (B) retraced exactly 100% of wave (A)
- Wave (C) is 5 waves (cleans impulse) from 7815-7834 projected exactly 138% of (A) and we have seen a sharp fall after completion of (C).
Note for Students/Learners:
Please look carefully at this “3-3-5 Flat Correction” and also read the same in topic “3-3-5 Flat Correction” in Chapter “Types of Correction” of my book. And this is the best example that Elliott Wave Theory Patterns are absolutely same on every time frame. The pattern that forms on Daily or Hourly chart forms same on even 5 minutes and 1 minutes chart.
And this pattern which looks very small on 5 minutes chart have same personality and structure if we see closely on 1 minutes chart. That’s is the reason I always suggest to follow lowest time frame or 5 minutes chart for learning, more accuracy and entry levels.
You can learn really faster by analyzing 5 minutes chart as Elliott Wave Theory Pattern form daily on 5 minutes chart which takes weeks/months to complete on Hourly or daily chart. More times you see pattern forming live on charts, more experience you will get. It is just like, if you know the calculation of ingredients to prepare 1 cup of tea, you can easily calculate how much ingredients you need to prepare 9, 99 or 999 cups of tea. But remembering the recipe of preparing 1 cup is easy than 9, 99 and 999 cups separately.
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For short/medium term, Charts are suggesting that the downside is limited and possibility of any big crash is rare as inner wave (1) of downwards move started from 7860 yesterday is comparatively low, even it may be wave (a) rather than 1. So, be careful with positional shorts for short term.
For very short term or tomorrow, we can expect a minimum bounce till 7756-7776 where we needs to refer pattern again and stoploss for any existing shorts should be some points above 7776, may be 7781. The possible levels for downside are 7706-7696-7611 and there are possibilities for a good recovery from lower levels.
Nifty can bounce from present levels also if the decline from 7860 is (abc) rather than impulse. So, exit from shorts if Nifty breaks above 7776-7781 and then wait for dip to enter longs after seeing latest pattern with small stoploss. Upside targets for short term/coming sessions may be 7860-7930.
Exact trade can be decided only after market opening tomorrows based on above mentioned conditions. Be strict to intraday/short term trades only. Conditions are not favorable for any positional trade yet.
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