Nifty Outlook and Expected Move for the Week 12 Jan 2015 to 16 Jan 2015

| January 11, 2015

Nifty opened huge gap up on Friday 09 Jan 2015 to touch the high of 8303 but declined sharply in mid session after some consolidation at top. Nifty declined more than 100 points from top to register day’s low of 8191 and traded with volatile swings after that. Finally nifty closed 50 points green at 8284. Let us see what charts are suggesting.

Elliott Wave counts of Nifty for 12 Jan 2015

Elliott Wave counts of Nifty for 12 Jan 2015

This is  5 minutes time bar chart of Nifty covering mover after yesterday’s low 8066. There is cluster of markings and calculations on chart and you need read carefully step by step. Let me explain.

It seems,

  • Wave (1) completed from 8066 to 8138 as Impulsive
  • Wave (2) completed from 8138 to 8087 as “abc” corrective that corrected wave 1 by exactly 70%.
  • Wave (3) completed from 8087 to 8303 which projected exactly 300% of wave 1.
  • Wave (4) completed from 8308 to 8191 which corrected wave (3) by 50%. Wave (4) corrected extended wave (3) here by more than 38% and inner wave (c) of (4) is also about 300% of (a). These conditions we see rarely especially at the time of some important events and news. If you see closely, inner wave 5 of (c) of (4) is also highly extended which is almost of 200% projection. This highly extended inner 5th wave made wave (c) almost 300% of (a), and this 300% (c) made wave (4) correcting 50% of (3). But waves followed every rule of Elliott wave Theory.
  • Wave (5) started from 8191 which need to break above top of wave 3 (8303) at least. And 61% projection for wave (5) placed at 8337. We need to see wave (5) closely.
Elliott Wave counts of Nifty for 12 Jan 2015

Elliott Wave counts of Nifty for 12 Jan 2015

This is again 5 minutes time bar chart of Nifty showing move after Friday’s low 8191 which I am assuming as start of wave (5).

  • First upside move from 8191 to 8272 looks like “abc” rather than impulse
  • Next down move from 8272 to 8205 is also a clear “abc” wave
  • Next upside move from 8205 to 8296 also resembles “abc” rather than impulsive

All these conditions are suggesting the possibilities of Ending Diagonal Triangle here for wave (5) with inner structure (abc-abc-abc-abc-abc). And that is what I presented on chart. Wave (ii) of ED was simple Zigzag, so wave (iv) can be complex correction.

Expected move in case of “Ending Diagonal Triangle” I presented on chart. And I advise you to read “Diagonal Triangles” chapter of my book “Practical Application of Elliott’s Wave Principles by Deepak Kumar” again and try to understand why I am showing this imaginary lines on chart.

Conclusion:

The setup on chart is suggesting progress of Ending Diagonal for wave (5). We can trade if nifty decline around 8230 as “abc” wave or “Complex Correction”. Nifty should not break below 8205 in first attempt to keep the pattern going.   This is just homework and move we can imagine seeing previous waves but any trade can only be done after seeing live waves during market hours.

Question from student:

One of my student asked me on Friday that, “Can wave 4 corrects extended wave 3 by more than 38% as you suggests that wave 4 rarely corrects wave 3 by more than 38% and you also suggests stoploss should be 38% retracement of wave 3?”

Answer: Less than 38% correction of wave 3 is what we see most of the time but is not a mandatory rule. I say, “Wave 4 rarely corrects extended wave 3 by more than 38%”   and not that “wave 4 can never corrects extended wave 3 by more than 38%”. The mandatory rule is that “wave 4 can never overlap wave 2 in clean impulse” which means wave 4 is allowed to go till the start of wave 2 (or top of wave 1).

And 38% stoploss I suggests for normal cases for the safety of trade if there is some other pattern going on like previously we were expecting wave 5 till 8548 but Nifty decline after completion of wave 3 from 8445 and formed “Irregular Correction” that was not in our mind. Our 38% stoploss saved us from those unexpected moves. We can exit from trade once wave 4 goes below 38% of 3 for safety and can re-enter again at inner wave (ii) of 5 if wave 5 starts. 38% stoploss is for safety against abnormalities.

This EW analysis report of Nifty is a part of 02 months FREE service for my book subscribers.

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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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