Thursday, May 10, 2012

Nifty following a Golden Path!

Bottom Line: Nifty following a Golden path in wave iii….

Nifty Daily chart:

Nifty 15 mins chart: A Golden ratio

Wave Analysis:

Published on 9th May 2012, Nifty gave away the entire move up it made the previous day. We mentioned in previous update, “We are not yet sure if a significant bottom around 5000 is in place. First positive confirmation will be obtained on a move above Friday’s high at 5180 and strong second confirmation is obtained on move above 5280. This will confirm that next leg up towards 5800 has started. However unless these levels are decisively taken out 5000 can be retested again. A move below 5050 will indicate the correction is ongoing and we can have sideways action to form a base before rally.

Nifty opened on a flat note and failed to sustain at yesterday’s level. Prices slowly started drifting lower and gained momentum as soon as 5050 was broken. This clearly shows the importance of that level.

A Golden path: Nifty 15 mins chart shows that each of the minor and minute wave iii is following 1.618 (Golden ratio) of wave i. This clearly reflects the precision with which market moves. Markets are always communicating with us in a cryptographic language we need to decode. If events are driving the prices, then minor wave iii (blue) taking support of 1.618 times wave i (blue) to the point and started rallying. The point to think about is that was the low created due to GAAR event or was it precise 1.618 ratio and prices were destined to rally up from there.

Currently prices have either completed wave iv at 5110 at today’s high or wave iv is still continuing in the form of triangle. If latter is true we might see some pull back today during the day with sideways time consuming action. Also minute wave iii (red) is exactly equal to 1.618 * wave i. If Nifty is still following Golden ratio path in its 3rd waves then prices should move between 4960 and 5020 for few hours and start pulling back up again in minute wave iv.

A faster move above 5110 will now provide first positive confirmation followed by a move above 5180. Unless these levels are taken out the bias remains negative and move below 4960 will indicate current wave iii is extending further towards 4900 levels.

Published on 10th May 2012 morning 8:30 in Financial Edge report, 

Nifty made a low of 4957 and a high of 5016 exactly near the range that was mentioned previously. Prices are taking support near 4960 levels. As long as 4950 level is now protected we can have a pull back today towards 5020 – 5030 levels.

For positivity over medium term it is important that prices break above 5110 levels. Unless that happen the medium term trend is down. We do not rule out the possibility of sideways triangle formation in the form of minor wave iv. However next few days of price action will tell if we have completed the entire down move that started on February 22 or one more leg down is pending.

In short, a break below 4960 will take us towards 4900 levels and any faster move above 5110 will indicate first positive development. Unless that happens, prices can continue to move in the range of 4960 and 5050.

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