Nifty is Still Indicating Bounce above 8728 – EW Analysis for 26 August Onward

| August 25, 2016

Nifty opened mild gap up today at 8668 and bounced to register day’s high 8683 but failed to sustain at higher levels and declined sharply by 100 points from high to register day’s low 8583 before closing 58 points down at 8592.

Yesterday, short term trading strategy was “Buying on Dips” and longs taken in 8594-8570 were suggested to hold using stoploss at 8594 expecting 8728 on upside. Further, suggested to avoid shorts even if stoploss of 8594 triggers as long as Nifty is trading above 8540. Trailing stoploss of 8594 triggered but trade was giving 90 points profit (8594 to 8683) at the risk of 54 points, thus the trade must be finished in either profit or cost to cost. 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 15 minutes chart

Elliott Wave Counts of Nifty on 15 minutes chart

This is 15 minutes time bar chart of Nifty covering bounce from 04 Aug 2016 low 8518. Again, there is no major change in the wave counts on this chart.

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). But move after 8683 is becoming very complex every next day. There is combination of (abc) waves after 8683 which carries the personality of a corrective wave.

So, overall conditions are still in favor of bounce above 8728 in near term before breaking below 8540. Even if break 8540, there is no sign of any bearish pattern for big decline on charts at of now.

Conclusion:

Nifty is trading in very narrow range of 100 points between 8700-8600 from last 8-10 sessions without giving breakout on any side and in 200 points range from last 01 month. But short term conditions are still not indicating any big decline and in favor of bounce above 8728.

Stoploss for fresh longs must be same 8539 but there is no sign of any bearish pattern even if 8539 breaks.

For Trading Point of View:

For short term, trading strategy must be “Buying on every decline” from present levels till 8541 using stoploss of 8539 expecting targets above 8728. Buying Sept 8800-8900 calls would be better and safe options using same stoploss as IV of calls is at minimum (at 10) and premium of calls is very cheap.

And avoid any shorts as long as Nifty is above 8540 and concentrate on “Buying on Dips” only with small stoploss. Even breaking below 8539 is not giving any sign of reversal or big decline at present and we need to look for fresh pattern if Nifty managed to break below 8540.

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Words for Clients/Subscribers:

Many of my clients/subscribers/followers are being frustrated that Nifty is not breaking above 8728 as I mentioned in many of my previous reports. But if you see clearly then you will notice that Nifty is not moving and it is trading in just narrow range of 100 points from last 10-12 days making correction complex every next day.

Even Nifty traded within just 200 points range in last 30 days. It is not that Nifty is not breaking 8728 but Nifty is not breaking on any side. Nifty traded in just 200 points range in whole August series and option buyers are definitely the loser which is the main cause of frustration.

One thing every trader needs to understand that any analysis method or analysts can just try to identify the markets moves but cannot move the market. Sometimes market becomes volatile, sometimes market consolidates and sometimes moves in one directly which is its nature and you need to act according to it. You need to understand these facts and respect these conditions otherwise being frustrated with these conditions can only ruin a trader.

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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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