Nifty Likely to Stay Positive on July 2016 Expiry Day

| July 27, 2016

Nifty opened flat at 8599 and bounced sharply just after opening to register day’s high 8665 within an hour after opening. But Nifty failed to sustain at higher levels and decline back erasing all the gains and registered day’s low 8572 followed by a bounce again before closing 25 points up at 8615. Overall it was a volatile day with both side sharp swings.

Yesterday, I mentioned stoploss for existing and fresh longs at 8577 (Positional longs taken at 8526 on 22 July and then fresh longs taken in 8605-8582 range yesterday) and minimum upside targets were 8644-8662. Nifty achieved the targets within hours after opening without triggering stoploss but retraced back sharply till 8572 again. So, let’s have a fresh look at latest chart for further outlook.

Today I am covering move from 08 July 2016 low 8287 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 28 July 2016

Nifty Elliott Wave Counts for 28 July 2016

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) till now. 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 impulse started from 8287 where wave (4) is completed at 8476 as Simple Zigzag and wave (5) is in progress. Minimum 38% projection for wave (5) is already achieved after break above 8594 whereas next 61% is placed at 8665. Wave (5) will be in extended zone after break above 8665.

The pattern formed at top is indicating bullish scenario or holding higher levels for some more days. Let me explained the conditions:

  1. If the bounce started from 8476 is wave (i), (ii) and progress of (iii) then Nifty likely to move higher as wave (iii) and (v) still needs to complete upwards. This condition I am expecting as of now and will carry move with trailing stoploss.
  1. If the bounce from 8476 is (a), (b) and progress of (c) then there will possibilities: –
  • Either this (abc) wave started from 8476 may be inner wave (i) of Ending Diagonal Triangle and it may take some more days to complete whole ED at higher levels
  • Or this (abc) bounce can turns into “Irregular” wave (B) and make Irregular Correction. Nifty can decline sharply towards 8476 in this case but followed by a bounce for new high again.

So, all the conditions are indicating bullishness or holding above 8476 in coming sessions. I explained all the conditions just to make learners understand about different possibilities in different conditions so that you can think of next if one is negated.

So, we need to look at bounce from 19 July 2016 low 8476 to conclude further short term scenario and to prepare next trading plan.

Nifty Elliott Wave Counts for 28 July 2016

Nifty Elliott Wave Counts for 28 July 2016

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) on first 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 (3) is already completed at 8665, (4) completed at 8572 and last wave (5) of (iii) may be in progress. Wave (iii) already achieved 161% projection and is extended.

[Inner wave (4) of (iii) retraced more than 38% but there is no indication of any other pattern]

If wave (4) of (iii) completed at 8572 then minimum 38%-61% projection for wave (5) of (iii) is placed at 8639-8680 but top of wave (3) is 8665. So, minimum 8665-8680 can be expected for wave (5) of (iii). And we can expect a 23%-38% decline again after completion of wave (iii) in 8639-8680 range or at bit higher levels.

If Nifty achieves 8665-8680 from here to complete wave (iii) then next positional stoploss for longs will be 8585 (start if wave (i)) as next wave (iv) can not overlap wave (ii).

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 8287.

Let’s look at today’s intraday move on separate 5 minutes chart to identify very immediate small stoploss.

Nifty Elliott Wave Counts for 28 July 2016

Nifty Elliott Wave Counts for 28 July 2016

This is again 5 minutes time bar chart of Nifty covering today’s intraday move. By continuing with the previous chart, wave (v) of (3) completed from 8577-8665 as impulse and then wave (4) completed from 8665-8772 as Simple Zigzag. And next wave (5) may be started from 8572 which must be Impulse or Ending Diagonal.

Now, if we look at bounce from 8472 then, wave (1) and (2) may be completed at 8582.65 and wave (3) may be in progress as shown on chart. And within wave (3), inner wave (iii) is in progress. Please look at all the main and inner wave counts on this chart carefully.

So, immediate stoploss for longs must be 8599 which is start of inner wave 2 of (iii) of (3) because wave 4 cannot overlap 2.

Calculating Small Stoploss using Elliott Wave Theory Analysis: Many of subscribers ask that how I calculate small stoploss using waves.

You must have observed that no matter if the minimum target is 50 points or 200 points, my stoploss is never more than 25-30 points even it is 10-15 points some times and these small stoplosses works perfectly most of the times. And there is no secret behind it, my stoploss based on the same rules which I have covered in the book.

No matter how big the wave is, it always start with a small inner wave and comprises of many small waves and these smaller inner waves also follows the same rules of EWT. So, if you look at smaller waves carefully then you will always find a small stoploss based on Elliott Wave Rules. You must observe carefully how I calculate my stoploss. Almost every of my report have stoploss and I always explain the reason behind the calculation of stoploss, you just need to pay attention.

In today reports also, minimum target of 8665-8680 we calculated from 2nd 15 minutes chart but stoploss I calculated by seeing the inner waves of the bounce from today’s low 8572 on last 5 minutes chart. And if you pay attention then this stoploss is based on mandatory rule of EWT that “Wave 4 can never overlap 2 within impulse”. And further stoploss can be calculated at every step.

And no matter if you are wrong or right. Stoploss may trigger and we can be wrong in identifying the patterns as no one can be accurate 100% but at least you have an immediate point which tells if you are going right or wrong with your analysis. And that is important, if you have very nearby point which decide if you are right or wrong so that you can calculate risk reward  then confidence will automatically buildup in your trading.

So, just pay attention and try to understand the reason behind every of my wave count. You will find that there is nothing complex but based on simple EWT rules only.

Conclusion:

Nifty achieved immediate targets 8644-8665 and retraced by 90 points again but short/medium term outlook is same. Nifty is still likely to be positive or hold above 8476 for some more days based on the conditions explained above and we need to ride this upside with small stoplosses and with regular profit booking.

And for short term or tomorrow, Nifty have possibility to bounce again towards 8665-8680 without breaking below 8599. And if Nifty achieved 8665-8680 straightway then we can witness a 23%-38% (50-80 points) decline again from 8665-8680 range or from bit higher levels.

We need to look at pattern again if Nifty even touches 8599 as there is no indication for any bigger fall yet.

For trading point of view, trading strategy must be “Buying on Dips” using 8599 as exact stoploss until Nifty achieve 8665-8680. And start booking profit or trailing stoploss if Nifty break above 8665. We need to exit from longs if Nifty breaks below 8599 but not to sell. We need to look at the pattern again if Nifty even touches 8599 for next trading opportunity.

And for medium term, If we look at the bounce from 8287 then we can observe that the entire inner wave (iv) or (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 8287. So, stay tuned and focus on smaller waves now onwards, I will alert whenever I find any perfect low risk selling opportunity or conditions most suitable for buying puts.

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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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