Friday, November 29, 2013

Nifty- Understanding double corrective Elliott wave pattern – Part I

The similar research is published in daily report "The Financial Waves" For more information  on subscription visit
Elliott wave is one of the classical technical analysis tools that helps to predict the future market direction and forecast simply using prices and nothing else. 
We are the followers of Advanced Elliott wave concept and to read the waves properly we apply other techniques as well like Channels which as per advanced concept is mandatory and not optional.
The below chart gives a very clear example of double corrective pattern that started from the high of 6340 levels. Many Elliotticians find it difficult to understand complex corrections. But it is not that difficult. There are 3 standard corrections: Zigzag, Flat and Triangle. If markets would have formed only 1 of these 3 standard corrections life would have been very easy but who said making money in markets is not like starting your own business. There is always risk you have to take and gestation period which is in the form of seeing profits. Even a novice trader has to see the different cycles of market before he can finally develop his own techniques of trading that has success of more than 50% probability. And combine that with Emotions, Money management, Risk ability, news flow, data, etc.
Let’s get back to Double corrective patterns. As per this pattern 2 corrections are combined together with a corrective pattern in middle known as “x wave”. 1st set of correction is combined with 2nd set of correction with x wave joining them. So a double zigzag correction is a-b-c-X-a-b-c. A double combination correction involving zigzag and triangle is a-b-c-X-a-b-c-d-e.  Also the 1stcorrection is for namesake called “W” and the 2nd correction is called “Y”. so 1st a-b-c is named W and 2nd a-b-c-d-e which is triangle is named Y. Now have a look at below chart:
Nifty 60 mins chart:
On one lower degree, the internal structure of this correction is clearly visible on 60 mins chart. 2nd corrective pattern within is forming as a triangle with lower trendline support near 6050 and upper resistance line at 6120. When triangle forms a part of complex corrective pattern it is known as non – limiting triangle since prices do have limitations to the upside movement like normal triangle has.
As shown on 60 mins chart, So crossing above 6110 – 6130 will be firmly positive which will break important short term resistance levels. Looking at short term wave counts, currency charts,PCR ratio, our expectation is of upside breakout….
The above was mentioned today morning research report “The Financial Waves short term update” before equity markets opened when prices were exactly at the channel resistance but the pattern was clearly looking completed by yesterday’s close. Today itself Nifty obliged by having a Gap up opening near 6120 and is now quoting at 6170.
So you can now clearly see how we identified pattern which helped in forecasting a breakout above 6120 levels. The complex corrective pattern is not that complex from understanding but it is just 2 corrections connected together and if you can understand this pattern it will help in making good forecasts yourself. There is more to the corrective patterns. Stay tuned and we will discuss that here in next part.
For seeing how we forecast markets using Elliott wave patterns and counts not only on Nifty but stocks as well you can subscribe to “The Financial Waves short term update” and see it yourself. Try it for a month and trust me if not anything you would have taken a step ahead in learning this wonderful technique of Elliott Waves!!!
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