Nifty May Start Correction From 8359-8418 Range – Elliott Wave Analysis for 03 Nov 2014

November 2, 2014

Nifty bounced 605 points in last 10 sessions and rising with the average of 60 points per session without any reasonable correction. Only a 23% correction was there in between but Nifty gave another 100% move after that. Now Nifty is at very crucial situation that I am going to explain on chart. Let’s see the bigger time frame first.

Chart 1

This is daily time bar chart of Nifty showing move after 7118 progressing as Ending Diagonal. Read Elliott Wave Analysis of Nifty for All time Frames Dated 18 Oct 2014 to know why I am taking it as ED. After the completion of wave (4) of ED at 7724, I expected the minimum targets 8380 for wave (5) in ABC patterns as wave 3 was only 110% of 1 (not extended) and we can expected wave 5 as extended which has to project minimum 61% and maximum can go till 100% and above. Wave 5 can go comfortably till 8380 now or after a correction and higher possible levels for this full wave (5) are 8468 and 8786. We need to see the move after 7724 closely to identify the further scenario.

Chart 2

This is 15 minutes time bar chart of Nifty covering move after 7724. After seeing this chart, three possibilities are arising there:

1. 1st (marked by red digits), Wave 3 completed at 8064 by seeing its personality (as I was counting in my previous reports) and wave 5 started from 7986 which extended to 100% projection till now. Thus, it is a highly extended 5th wave. In this case, there may be a sharp correction till 8020 and below after completion of this wave as extended 5th wave corrects 100% most of the time and wave 5 steeper than wave 3 is always dangerous. 100% projection for wave 5 placed at 8326, 123% placed at 8406 and 138% placed at 8455.
2. 2nd (marked in blue letters), Wave (a) completed at 8064 and wave (c) started from 7986 which extended to 100% projection of wave (a) till now. Nifty move supporting this possibility as wave (c) is faster than (a) here but with only 23% correction as wave (b). In this case, Nifty needs to show at least 8380 and we can see bigger correction after that to break below lower line of Ending Diagonal on (Chat 1). There will be the end of Ending Diagonal after completion of “(c) in this case followed by next bigger correction.
3. 3rd (marked as brown digits), if it is wave (1) completed at 8064 and wave (3) started from 7986 then we can see much higher levels for this full impulse.

Now, we need to see the inner waves of move after 7986 for more accuracy and confirmation:

Chart 3

This is 5 minutes time bar chart of Nifty showing move after 7986. If I count inner waves of this move, it seems waves (1), (2), (3) and (4) are completed and wave (5) is again highly extended above 100%. I also labeled minor and minute degree inner waves here and if you see closely, every lowest, lower and higher degree wave in this impulse is highly extended.

Higher degree wave (3) from 7995 to 8167 extended massively 561% of 1 (which is the last ratio of extension on my Fibonacci Calculator) and next wave 5 is again massively extended up to 100% till now. These types of waves we generally see on occasion of very important event and are very dangerous.

Also observe that steepness is continuously increasing as the wave progress and is near to 900 at the top on even 5 minutes chart (shown by red dotted curve).  Wave (5) is again steeper than (3) here. Generally we see very sharp fall after these types of wave formations.

End of this impulsive seems near as wave (5) already extended till 100% and is already in danger zone.  After completion of this wave, if whole impulse is wave (5) or (c) shown on (Chart 2) we can expect a correction till 8000 levels from top. And if it is wave (3) shown on (Chart 2) then we can expect minimum 70 to 120 points correction from top.

Thus, correction seems near in all three cases either small or big.

Now, we need to dig deeper and see the inner wave of move 8139 closely to estimate the end of this wave.

Chart 4

This is again 5 minute chart of Nifty showing move of last impulsive after 8139.

Here wave (iii) is extended as it projected 338% of (i) and wave (v) projected 38% till now whereas 61% and 100% projections are placed at 8359 and 8418 respectively. So, there may be the end of this wave in 8359 to 8418 range.

Conclusion:

By analyzing every probability and analyzing all higher degree, lower degree and lowest degree waves, it seems a correction from 8359 to 8418 levels. Correction may be of 70 to 120 points or till 8000. Nifty can be sold lightly at top after seeing the waves and downward reaction with stoploss. But never trade without stoploss as Nifty can go very higher if it is wave (3) started from 7986. Trading light in 8250 and 8200 put would be safer for low risk trades.

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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"

It is in respect to this scenario no 3rd
(marked as brown digits), if it is wave (1) completed at 8064 and wave (3) started from 7986 then we can see much higher levels for this full impulse.

Is it not necessary for move from 7724 to 8064 to have 5 internal waves to mark it as 1 in brown digits. I think there were only 3 waves from 7724 to 8065 as: 1) 7724-7934 , 2) 7724-7874 , 3) 7874-8065.
To my mind this move was a 3 wave move , and if it so then can we categorize this as abc of A and then again abc wave of B as : a) 8064-8014 , b) 8014-8033 , c) 8033-7986 and now we are in C.
Main think i need to know is if move from 7724 to 8064 was a 5 wave move.

• Deepak Kumar says:

Yes, there may not be 5 waves in move of 7724 to 8064. I just given the possibility here and 3rd conditions I given very short and without any explanation. because I am not going with it till now. But shown possibility to me readers who are learning Elliott Wave theory from me, because wave 7724 to 8064 have opening gaps and it is very tough to identify waves within gaps.

“To my mind this move was a 3 wave move , and if it so then can we categorize this as abc of A and then again abc wave of B as : a) 8064-8014 , b) 8014-8033 , c) 8033-7986 and now we are in C”

We can take is only as wave 1 ,2 and 3 if it is 3 waves move which is my first priority seeing gaps. We can’t take it as abc = A. A allowed as abc only in Flat corrections (335) otherwise A is always 5 waves move. Here, there is no such scenario of Flat Correction as next B only retraced 23%.

But if you are applying any other alternate/modified “wave’s theory” like Neo Waves, Wolf Waves or Harmonic or something like that, then it may be abc=A. I use classic Elliott’s wave theory only and A as 3 waves move only and only allowed in Flat Corrections (335). I will not be able to comments on any other alternate wave theory other than Elliott’s Wave Theory as I know nothing about others.

2. Mahesh says:

Hence wave 1= 100 points, wave 3=100 points, wave 5= 92 points. How can wave 5 be extended then? it is smaller than wave 1 and wave 3.

3. Mahesh says:

Lets suppose, Wave 1 moved from 0 to 100, Wave 2 moved from 100 to 50 and wave 3 moved from 50 to 150. Meaning o-3 is 150 points. also wave 1 equals wave 3 both are 100 points each and both are normal (not extended). Now if 5 is 61.8% of 0-3 meaning 61.8% of 150=92 points. Hence wave 1= 100 points, wave 2=100 points, wave 5= 92 points. How can wave 5 be extended then? it is smaller than wave 1 and wave 2. The minimum criteria for 5th wave extension is 161.8 of wave 3 or 100% of 0-3 whichever is smaller.

• Deepak Kumar says:

It is not necessary that extended wave must be larger one. Wave’s extensions counted with respect to Fibonacci Projections and not by comparing lengths. If wave 5 is more than 61% of total move from 0 to 3 then it comes under extended category. Wave 5 is calculated with respect to the total move that both wave and wave 3 covered jointly. If wave 5 is more than 61% of the total length that two previous impulsive jointly covered then it is extended. No matter what is the length of individual waves.

4. Mahesh says:

Hi, the minimum target for a extended 5th wave of a ED is 100% of 0-3. 0-3 is 7215-8179 = 964 p0ints. Adding it to 7723 gives 8688. Hence 8688 should be the minimum target. But that is not all! We need to take into consideration the next higher degree also. In the his higher degree also a extended 5th is being played out and the targets for that is around 9060. This is my opinion.

• Deepak Kumar says:

Mahesh Ji,

Minimum for extended wave 5 is 61% of total move from 0 to 3 and maximum can be 100% and even till 200% in extreme conditions. And I said just minimum here and counts considered from 7118 as it was flash low. Possibilities for higher levels are always there and I just mentioned. Next I will calculate by seeing proceeding waves.