Nifty Likely to Decline by 250-400 Points Without Breaking much above 8783

| July 31, 2016

Nifty opened flat at 8668 and then traded in 40 points range between 8670-8631 for rest of the day before closing 27 points down at 8638. Overall it was a dull day with negative bias.

Friday, I didn’t suggest any trade as upside was very limited and for downside also only 25-40 points was expected. I just suggested to book profit in longs. Buying was suggested after decline in 8630-8603 range with 8599 as stoploss and Nifty didn’t achieve buying range. Nifty gave 25-40 points decline as expected. Let’s have a fresh look at latest charts now.

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.

Nifty Elliott Wave Counts for 1 August on daily chart

Nifty Elliott Wave Counts for 1 August on daily chart

This is daily time bar chart of Nifty covering move from 29 Feb low 6825. Though this bounce progressed with lots of overlapping of waves which made it tough to identify counts but still I am marking most probable counts based on my understanding.

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. Inner wave (C or 3) seems within its inner wave (3) and we can expect a 23%-38% (250-400 points) correction after completion of wave (3) started from 7715. 23%-38% retracement calculated from recent high 8674 is placed at 8386-8258.

So, we need to look at very last upside impulse started from 8287 which I expecting as start of inner wave 5 of (v) of (3) of (C or 3). Let’s see if this impulse is completed or not.

Nifty Elliott Wave Counts for 1 August on 30 minutes chart

Nifty Elliott Wave Counts for 1 August on 30 minutes chart

This is 30 minutes time bar chart of Nifty covering bounce from 08 July low 8287 which I am assuming as progress of wave 5 of (v) of (3) of (C or 3) till now, please look at the counts of daily chart carefully. This is same chart with explanation which I explained in my last report as there is no major change in wave counts on this chart.

It seems an impulse started from 8287 where inner wave (4) is completed at 8476 as Simple Zigzag and wave (5) is in progress. Wave 5 already achieved 61% projection after break above 8665 and is already in extended zone whereas next 100% projection is placed at 8783.

Wave (5) is already in extended zone after breaking above 61% projection 8665 but may not extended much higher above 100% projection 8783 as wave (5) extend above 100% projection in very rare cases. There are indications of a near term top below or around 8783 but not much higher above 8783 followed by a good correction.

So, we need to look at bounce from 19 July 2016 low 8476 to see the progress of wave (5) and to prepare next trading plan.

Nifty Elliott Wave Counts for 1 August on 15 minutes chart

Nifty Elliott Wave Counts for 1 August on 15 minutes chart

This is 15 minutes time bar chart of Nifty covering bounce from 19 July 2016 low 8476 which I am expecting as start of wave (5) above 30 minutes chart.

It seems inner wave (i) of (5) is completed from 8476-8585, wave (ii) completed from 8585-8489 and wave (iii) in progress from 8489.

And within wave (iii), it seems inner wave (4) is already completed at 8572 and next wave (5) is in progress which already achieved its minimum requirement after breaking previous high 8665 whereas next 61%-100% projection is placed at 8680-8748.

We can see 23%-38% retracement (40-70 points decline) after completion of wave (iii) started from 8489 but not below 8585. 38% retracement of whole wave (iii) progressed till now is placed at 8603, so 8603 is the point below which we can think of any reversal.

Important Observations: If we look at the bounce from 8287 then we can observe that all the inner waves (iv) of (4) are retraced deeply (more than 38%). This is the indication that Nifty may be losing momentum and short term top is very near. We can see a good correction after completion of this wave (5) started from 8476.

Let’s look at progress of very last wave (5) of (iii) started from 8572 on separate 5 minutes chart.

Nifty Elliott Wave Counts for 1 August on 15 minutes chart

Nifty Elliott Wave Counts for 1 August on 15 minutes chart

This is again 5 minutes time bar chart of Nifty covering bounce from 27 July 2016 low 8572 which I expecting as start of wave (5) of (iii) on above 15 minutes chart.

Now, if we look at bounce from 8472 then, inner wave (i) may be completed from 8572-8610, (ii) may be completed at from 8610-8582, wave (iii) may be completed from 8582-8674 and wave (iv) may be already completed from 8674-8631 or complete at bit lower levels.

If wave (iv) already completed at 8631 then minimum 38%-61% projection for wave (v) is placed at 8669-8694 but top of wave (iii) is placed at 8674. So minimum 8674-8694 we can expect for wave (v) followed by some decline.

If we look at progress of wave (iv) then wave ‘C’ of (iv) achieved 100% projection after breaking 8632 whereas 123% is placed at 8623. On the other hand, 38% retracement for wave (4) is placed at 8638 which is already broken, so very immediate stoploss for longs must be 8623.

Conclusion:

Nifty is trading with positive bias from last 4-5 session perfectly as expected which may continue for 1-2 more sessions but a short/medium term tops seems very near. By looking at the conditions on all the charts of Nifty we can conclude that: –

For short/Medium term:

The short/medium term top seems very near as Nifty is in inner wave [(5) of 5 of (v) of (3) of (C or 3)] from 6825 which is about to complete. We need to wait to identify exact range but Nifty has very rare possibility to break higher above 8783 before any reasonable correction. And we can expect 250-400 points [23%-38% retracement of wave (3) of (3 or C)] decline from top.

So, positional trading strategy to be “Sell on Rise” towards 8783, preferably buying 8500-8400 August Put with Stoploss of 25-30 points expecting 250-400 points decline. Exact Selling Range and Stoploss can be calculated later after identifying the completion range of last wave (5) on 5 minutes chart which I will update after identifying the signs.

Other Important Observations: If we look at the bounce from 8287 then we can observe that all the inner waves (iv) of (4) are retraced deeply (more than 38%). This is the indication that Nifty may be losing momentum and short term top is very near. We can see a good correction after completion of this wave (5) started from 8476.

For very shorts term,

Nifty may stay volatile between 8600-8750 range with up down swings. First Nifty can rise towards 8674-8694 followed by small decline of 40-70 points followed by last attempt for new high and then good correction. Overall, it may confuse traders for a while before decline.

For trading points of view, book all positional longs in Nifty and avoid any fresh positional longs. Swing trades can be done based on the conditions explained above after identifying smaller wave patterns on lowest time frame.

For tomorrow/intraday, trading strategy is to “Buying on Dips” with immediate stoploss 8623 expecting targets 8674-8694. Book profit or trail stoploss once Nifty moves above 8674. If Nifty opens or break below 8623 without achieving new high then final stoploss for all longs is 8585 for same target of 8674.

Trade with strict stoploss and entry must be only if get price 15-20 points nearer to stoploss for good risk/reward as upside targets range is very limited. Be limited to intraday trade only on buying side. Safe traders can avoid trades in these conditions and wait for perfect time to enter positional sell.

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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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