Wednesday, July 3, 2013

Nifty: An Elliott wave perspective

Bottom Line: Nifty formed an inside bar yesterday which indicates short term pause to current rally. 

Elliott Wave perspective: As shown on daily chart, prices are moving in wave c of wave (e) of wedge pattern. Wave (e) looks to be forming a Flat correction with wave a ended at the top near 6230 levels, Wave b at the lows of 5580 and wave c ongoing on upside. Wave b of this Flat correction retraced around 90% of wave a. There are different variations in Flat corrections and if wave b ends within 61.8% to 100% of wave a it is called regular Flat correction. The strength of wave b helps us to evaluate how far wave c can go. In case of regular Flat correction chances are high that wave c will reach the level from where wave a started in this case it is 6230 or can also exceed this level by around 23.6% – 38.2%. Also wave c can tend towards equality with wave a which is near 6300 levels. This is also the level where strong wedge resistance line is placed. So the upside projection for this up move is anywhere between 6200 – 6300. We will closely monitor how prices react from those levels if it reaches there. Over short term, as the current up leg retraced the previous minor down leg from 5850 to 5570 in faster time advanced Elliott wave concepts suggest there is very high probability of start of wave c towards 6200 levels. However move below 5700 will indicate some other scenario is ongoing and the current up move in just another wave x but this looks very low probability as of now and the characteristics of rally from 5570 to 5900 looks impulsive rather than corrective in nature with strong participation from broader markets. X waves takes more time and travels less distance and are lead by only few stocks. So this increases the odds that the up move is impulsive in form of wave c of (e) and not an x wave.

As shown on 60 mins chart there is minor breach of the short term channel. Break of channel should never be criteria of taking a trading position since channels can break during sideways consolidations as well. It is always important to wait for break of crucial supports or resistances before taking a trading decision.... 

To read more about Nifty Elliott wave research subscribe to "The Financial Waves short term update" by Waves Strategy Advisors. Visit for more information

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