Nifty Indicating Cautions for Decline Below 6869 Again – EW Analysis for 22 Feb Onwards

| February 21, 2016

Nifty opened mild gap down on Friday at 7170 and declined till 7145 but bounced again from lower levels to register day’s high of 7226 before closing 19 points up at 7210.

Friday I mentioned that Nifty is in the middle of a wave. Either we can sell in 7284-7291 range or we can buy around 7117 for target above 7224. Nifty didn’t achieve any of the entry range, though achieved target 7224. Let’s analyze latest charts to conclude further scenario.

Today I am showing wave counts of Nifty from Sep 2012 low 5118 as read my all time frame report for previous counts. This is the same weekly chart with explanation which I posted in my Friday’s report as there is no change in it.

Elliott wave counts of Nifty on weekly chart

Elliott wave counts of Nifty on weekly chart

This is weekly time bar chart of Nifty covering move from Sep 2012 low 5118. Same as I explained in my previous reports,

Wave (1) may be completed from 5118-6419, wave (2) may be completed from 6415-5933 and wave (3) may be completed from 5933-9119.

But wave (4) retraced about 70% of (3) which is not common. And 6415 is start of wave (2) which is maximum limit from wave (4) in all the cases.  So, we need to look at decline from 9119 on separate daily chart.

Elliott wave counts of Nifty on daily chart

Elliott wave counts of Nifty on daily chart

This is daily time bar chart of Nifty covering move after all time high 9119. I am not showing any wave counts on this chart but just added for some observations. This is the same daily chart with explanation which I posted in my Friday’s report as there is no change in it.

If I look at the whole chart then fall from 8336 is continuous without any big correction whereas there is overlapping of waves in previous move from 9119-7539. And sharp and straight decline from 8336 already achieved 61% projection after breaking 7359 whereas 100% is placed at 6756.

But if I look at whole decline from 8336-6869 then it started slowly, progressed with speed and finally crahsed suddenly. This type of pattern I have observed many time within wave (5) and (c) and some time in wave (3) also. And we also see a sharp reversal after this pattern some times.

We can trade this type of pattern in case there is such wave of 80-100 points but last sharp wave from 7600-6869 is more than 700 points. So, it is risky to plan a safe trade for this condition.

Now, lets have a look at sharp and sudden last decline from 7600:

Elliott wave counts of Nifty on 30 minutes chart

Elliott wave counts of Nifty on 30 minutes chart

This is 30 minutes time bar chart of Nifty covering decline from 01 Feb high 7600. This is again the same 30 minutes chart with explanation which I posted in my Friday’s report as there is no change in it.

It may be wave (1) completed from 7600-7350 but later it is not sure if wave (3) completed at 7175 and (5) completed at 6869 it is just wave (3) completed at 6869. Please read the chart carefully.

If it is wave (3) completed at 7175 then it is not extended and wave (5) already achieved more than 61% and is already extended. But we didn’t see sharp 100% retracement of extended wave 5 yet, so maybe wave (5) not completed yet.

Again if (3) completed at 7175 and (5) started from 7256 then 7256 (start of wave 5) is reflex point but first impulse failed to complete above reflex point. So, we need to be cautious.

And if it is just wave (3) completed at 6869 then wave (4) already retraced more than 38% whereas 61% retracement is placed at 7266. 7350 is start of wave (2) which is maximum limit for wave (4).

Now let’s have a look at bounce from 12 Feb 2016 low 6869 if we can identify something.

Elliott wave counts of Nifty on 5 minutes chart

Elliott wave counts of Nifty on 5 minutes chart

This is 5 minutes time bar chart of Nifty covering move from 12 Feb 2016 low 6869.

It may be wave (A or 1) completed from 6869-7200, wave (B or 2) may be completed from 7200-6960 and wave (C or 3) started from 6960. Wave (C or 3) already broke the top of wave (A or 3) and achieved minimum projection of 61% whereas 100% projection is placed at 7291.

But wave (C or 3) gone slower than (A or 1) and didn’t achieved 100% projection yet. So, maybe it is wave (C) rather than (3) and we need to be cautious for a decline below 6869 again.

And within wave (C or 3), it seems inner wave (iii) completed at 7215 and wave (iv) may be already completed at 7127 or may complete at bit lower levels. 38% retracement of wave (iii) is placed at 7117. Wave (v) can project minimum 38%-61% which is placed at 7224-7284 calculated from 7127.

Conclusion:

 First Impulse from low failed to complete above Reflex Points as explained on 3rd 30 minutes chart and wave (C or 3) is slower than wave (A or 1) and not even achieved 100% projection yet. Both these conditions are warning cautions that may be the bounce from 6869 is just a corrective bounce and we can see one more down leg below 6869 again. This is a possibility and reason to be cautious.

On the other hand, 7350 is start of inner wave (2) on 30 minutes chart, so possibility for a decline below 6869 may be negated if Nifty breaks above 7351.

So, light shorts can be initiated if get Nifty around 7291-7300 with 30 points stoploss expecting targets below 6869 otherwise wait for the right opportunity to initiate trade. Trade light and with strict stoploss to protect yourself from heavy losses in case our trades goes wrong.

VIX is still at higher levels, so one can buy puts if expecting decline but try to trade in Futures if expecting bounce, avoid calls if trading for bounce.

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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"