Friday, March 30, 2012

Nifty starting Wave up!

Bottom Line: Nifty gave a strong move up and broke above crucial resistance levels. This confirms the pattern as Ending Diagonal!

Nifty Daily chart:

Nifty 60 mins chart:

Waves Analysis:

Nifty had a strong move up on last day of the week. Prices opened gap up above 5200 levels and rallied throughout the day. We mentioned in our previous update, Prices usually rise violently when they break out of Ending diagonal pattern and so maintaining stop of 5250 for existing short positions is extremely important. In short, a clear trend shall emerge very soon within a day or 2 in either of the directions…”

We can see that the rally has been violent and fast. Also the Advance / Decline ratio has been very much in favor of Advancing stocks. This type of behavior is usually seen in case of strong breakouts.

When the correction started on 2nd Feb 2012 from 5630, we mentioned that the trading environment will be difficult and challenging. Market has vindicated that stand. Impulse waves are very easy to identify and trade and corrections are equally difficult. Most of the people lose what they earn during impulse waves in these types of corrections. Money management and less leverage is the key to maintain the profits earned previously.

March has been the most challenging month since the start of 2012 from trading perspective. There was no clear trend and direction. Markets exhibited high intraday volatility but making very little progress in either direction. On 1st March Nifty was 5340 and on last day of the month it closed at 5295. This simply shows the entire month made almost no net movement in either direction despite being many events and scams being unearthed.

Also an important thing to observe is when on bad news market fails to move down it indicates inherent strength. Indian markets have been able to absorb all the negatives in March and has finally closed marginally down.

For now, the bias is firmly positive and we might have completed the entire wave B down at the low of 5136. Also the rally on Friday retraced the e leg of diagonal faster than it took to form thereby confirming that the trend is now positive from short to medium term.

From medium term perspective, we might have just started wave C on the upside and this will take us above the end of Wave A which is 5630 at minimum. The next probably target comes to around 5880.

It is too soon to say if next leg up has actually started and follow up rally this week is important to conclude that.

In short, as long as Nifty is above 5200 the trend is now firmly up and we can reach near 5490 over short term. Any move below 5200 will indicate the complex correction is ongoing but the latter looks a lower probable scenario as of now!


  1. i think nifty is still in correction phase. if you see the daily charts, then nifty is still in c wave of the corrective wave. one of rules of elliot wave is that the last wave shud be a 5 wave pattern. until now nifty has completed subwave 1 and is in the process of completion of subwave 2 of the c wave. nifty should find resistance near 5330 which would mark the end of subwave 2 of the c wave. similarly subwave 3,4 and 5 would take the nifty to 5070 levels.

  2. i think you guys are too optimistic.i believe nifty is still in correction phase. if you see the daily charts, then nifty is still in c wave of the corrective wave. one of rules of elliot wave is that the last wave should be a 5 wave pattern and each of the 5 waves should exhibit a-b-c type pattern. until now nifty has completed only sub-wave a (with a-b-c pattern) and is in the process of completion of sub-wave b of the c wave. nifty should find resistance near 5330 which would mark the end of sub-wave b of the c wave. similarly sub-wave c,d and e of the wave c would take the nifty to 5070 levels or even lower to 4900 in worst case.


  4. I never mentioned a month back that 4530 will break. As I was bullish in entire Jan and bearish in Feb, I was expecting this correction to go near 4900 levels not below that. In January Nifty path you are right I was expecting a peak might be due in March but Nifty has one up C leg pending and has consumed most of Feb and March in this down correction from 5629 to 5136, thereby delaying next big leg down by few more weeks or month. I still believe once this rally ends we are going to have a steep down move closing the election gap but that might take few more months...

  5. Dear sir as you said in Jan.... Nifty will break 4531 after March we are still hoping the same......and bearish towards the market...I am short at 4700 but not covered my position till average cost now 4900........please tell me do you think so market will" Break 4531" if than when??????if not than shoud I book my loose or holding the same?????plesase guide me ?????

  6. This was published on Jan 2, We warned of impending steep rally ahead: This is what was mentioned...

    2012 PATH AHEAD:
    The second chart clearly shows what we are expecting in 2012. 69 days Time cycles that we have been showing since past 6 to 9 months is bottoming out around 16th Jan (+ 8 days). The prevailing sentiment is extremely bearish, which is contrarian indicator for us. A break of previous low at 4531 will turn even the remaining few bulls into bears and that is exactly where Nifty should bottom out for medium term.

    Wave pattern forming is an ending diagonal (Wedge) and it satisfies the most important requirement of loosing momentum as can be seen from both weekly and daily chart where RSI is constantly forming higher bottoms. We are currently in wave e of this pattern or wave d is still ongoing. Either ways it will be sideways to lower drifting market with no strong direction over next week. An end of terminal pattern result in euphoric rise that retraces the complete previous down pattern in less than half the time and sometimes in just a fourth of the time. A move up as shown on chart will be surprise to many but not to our readers.....

  7. Market may touch 5440 which is 61.8@5630-5135. If it cross 5630 than we expect that it may touch 5880. There is possibilities of down move as per my view and make new low @4640-4140. Time will tell.