Nifty is Likely to Bounce above 8728 Without Breaking Below 8540

| August 23, 2016

Nifty opened flat at 8667 and bounced to register day’s high 8684 but failed to sustain at higher levels and declined back to register day’s low 8614 before closing 37 points down at 9629.

Yesterday, short term trading strategy was buying on dips towards 8594-8570 using stoploss of 8539 expecting near term targets of 8728. Immediate stoploss for existing longs (not fresh longs) was 8646 and decline towards 8594-8570 was expected after breaking below 8646. Nifty declined till 8614 till now. Let’s have a fresh look at latest charts for further scenario.

Today I am covering move from 29 Feb 2016 low 6825 and previous waves counts are explained in my all time frames report Elliott Wave Counts of Nifty for All Time Frames as on 18 July 2016.

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 from 29 Feb low 6825. Nifty is rising from 6825 without even a 38% correction in between but with lots of overlapping which makes it difficult to identify inner waves confidently. This is the same chart with explanation which I explained in my last report as there is no major change in wave counts on this chart.

By casual look it seems an impulse completed from 6825-7992 which could be wave (A or 1), decline 7992-7678 may be wave (B or 2) and wave (C or 3) may be in progress from 7678.

Minimum 61% projection for wave (C) is placed at 8399 which is already achieved and minimum 100% projection for wave (3) is placed at 8845.

Within Inner wave (C or 3), it seems either wave (3) or (5) in progress. If it is still inner wave (3) in progress then inner waves are not clear to calculate its exact top and we can expect 23%-38% retracement (250-400 points decline) after completion of wave (3).

But, if wave (3) is already completed at 8711 and wave (4) is already completed at 8518 (not achieved even 23% retracement) then minimum 38%-61% projection for wave (5) is placed at 8912-9156.

There is lack of confidence in wave counts of this whole bounce from 6825, the only thing we can conclude is, either we can see a bounce towards 8912-9156 if Nifty have to move upwards otherwise a decline of 250-400 points is expected in near term. Conditions are favouring upside at present.

Now, we need to look at bounce from 04 Aug 2016 low 8518 for further scenario.

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 bounce from 04 Aug 2016 low 8518.

It seems an impulsive wave is completed from 8518-8728 which can be wave (A or 1) followed by completion of corrective wave (B or 2) from 8728-8540 as Simple Zigzag. Further wave (C or 3) may be in progress from 8540 and normal 100%-123% projection for wave (C or 3) is placed at 8750-8799.

Further, the bounce from 8540-8683 is very sharp without giving clear indication of inner waves so it is difficult to decide if impulse is already completed from 8540-8683, it may be inner wave (1) of (C or 3). Wave (2) of (C or 3) may complete somewhere in 8600-8570 range (but not below 8540) as Irregular Correction followed by wave (C or 3) for 8696-8728 again.

61%-78% retracement for wave (2) of (C or 3) is placed at 8594-8570 which is the next possible range on downside if it is Irregular correction is in progress after 8683. 

So, overall conditions are in favor of rise above 8728 either from present levels or from 8594-8570 range without breaking below 8540 and we need to prepare next trading plan based on these conditions.

Conclusion:

Again, there is no major change in medium/very short term outlook. There is lack of confidence in concluding any once side movement. We can just expect either a bounce towards 8912 or a decline of 200-350 points from high. Conditions are in favor of upside at present.

For very short term also, overall conditions are still in favour of bounce above 8728 either from present levels or after a dip towards 8594-8570 and stoploss for any longs is 8539 only which is big at this movement.

For Trading Point of View:

For short term, trading strategy must be “Buying on Dips” on dips towards 8594-8570 using exact stoploss of 8539 expecting short term targets above 8728. It is safe to buy 8800 Sept Nifty Calls in 8594-8570 range using stoploss of 8539 as stoploss is big and if we are right at identifying the pattern then next wave (3) of (C or 3) needs to bounce faster. Trade must be in such quantity so that you will be comfortable even if premium of calls decreased by 50%.

Nifty can bounce from present levels also. So, avoid any shorts as long as Nifty is above 8540 and concentrate on “Buying on Dips” only with small stoploss. We need to look for fresh pattern if Nifty managed to break below 8540.

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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"

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