Nifty opened mild gap up on Friday at 8594 and declined sharply to register day’s low 8549 but traded with positive bias later for the day. Nifty bounced gradually from morning low to register day’s high 8604 before closing 10 points up at 8583.
Friday, there was no particular trading strategy suggested but just mentioned that “I would like to buy Nifty Nov 8900 Call before closing on Friday if see Nifty below 8550” and further 8618 was suggested as point for any short term reversal and stoploss for shorts. Nifty declined below 8550 and traded below 8618 for whole day. Let’s have a fresh look at latest charts for further scenario.
Today I am covering move from 04 Oct 2016 high 8806 as previous waves counts are explained in my last analysis report Nifty Can Bounce towards 8700-8800 from 8550-8393 Range.
This is 15 minute time bar chart of Nifty covering decline after 04 Oct 2016 high 8806.
The decline from 8806-8731 may be wave (1 or A), bounce from 8731-8781 may be wave (2 or B) and wave (3 or C) may be in progress from 8781. And within wave (C or 3), inner wave (iii) may be completed at 8541 and (iv) or (v) may be in progress. I am showing the possibility of both (123) and (ABC) because there is also a possibility of complex correction for whole decline started from 8968.
38% retracement of wave (iii) of (3) is placed at 8618 which is the point above which we can think of any reversal and same must be the stoploss for longs. Whereas, there is a possibility of one more decline of 92-150 points for wave (v). Minimum 38%-61% Projection for wave (v) is placed at 8512-8455 if calculated from 8604.
But the pattern at bottom after Thursday low 8541 is interesting to watch which is indicating one possibility of very sharp rise. Let’s have a separate look at the bounce after low 8541 on 5 minutes chart.
This is 5 minutes time bar chart of Nifty covering bounce after 13 Oct 2016 low 8541.
By casual look, the pattern of this bounce looks like repeated upside impulse followed by downward correctives which can be Wave (1) and (2) followed by inner waves (i) and (ii) of (3), followed by inner waves 1 and 2 of (iii) of (3). And there are three sharp downward waves carrying the personality of inner wave (c) of Irregular Correction indicating three repeated downward correction. Please read the wave counts carefully on the chart.
If the counts or scenario I have explained on chart is right then Nifty needs to bounce very sharply from here because it needs to complete all waves 3, (iii) and (3) followed by 5, (iv) and (5) to complete the pattern. And all the waves 3, (iii) and (3) are known to be faster, steeper and longer.
But if this bounce is progressing as some sort of Complex Correction then Nifty can decline back by 92-150 points as explained on previous 15 minutes chart.
We need to find and calculate very appropriate condition for trading this possibility with lowest risk.
Point to note for Learners: I have explained this 5 minutes chart covering bounce after 8541 with pattern of repeated upside impulses followed by downward correctives because you can trade whenever see these type of patterns using Nifty Options (buying Calls/Puts according to the direction of pattern) because move will be faster in these cases and stoploss will be small. And you can get huge profit by this pattern taking very small risk. It is not necessary if whatever I have explained is definitely going to happen but if it happens then there is a huge profit opportunity with small risk.
For medium term, pattern of the whole decline from yearly high 8968 still looks corrective because of overlapping of waves. Otherwise Nifty need decline sharply with speed without any break to keep the personality of downward impulse. Most of the conditions are favoring a bounce till 8700-8800 range or may be above 8968 from 8550-8393 and one rare condition is indicating a sharp continuous decline towards 8200 and below.
And for very short term, the point above which we can think of reversal is 8618 and there is possibility of one more decline of 92-150 for wave (5). But the pattern formed at bottom after low 8541 is also indicating the possibility of very sharp rise of 100-200 points and same is explained on 5 minutes chart above. So, we need to keep both conditions of decline and sharp rise in mind when preparing trading strategy.
For Trading Point of View:
For Medium Term, Nov 8900 Call if bought at 8550 spot can be hold without any stoploss and same can be bought fresh if Nifty decline below 8541 again. Trade should not exceed 5% of capital as this 8900 Nov Call has every possibility to be Zero. This trade is done just based on the general structure of pattern and not on deep wave counts.
For Short Term,
- If Nifty open gap up above 8618 or touch 8619 sharply after opening then small risk of 20 points can be taken by Buying Nifty at 8619 using stoploss of 8599 expecting very sharp rise towards 8700-8800. Change stoploss at cost when Nifty break above 8650.
- If Nifty consolidates below 8618 for couple of hours then Nifty can be sold with stoploss of 8619 expecting 92-150 points decline.
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