Friday, March 27, 2015

Can Nifty create a panic low? Prices near crucial zone!

Bottom Line: Nifty had a strong negative close on the expiry day creating a panic scenario but buying April Put still wouldnt have been of much help!

Nifty daily chart:

 Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that,The entire structure looks like a contracting spring which is going to explode strongly to produce a trending move very soon In short, Nifty has now arrived at crucial juncture. We have been successful in capturing the downtrend so far but now a move above 8630 will indicate positivity. Let us see if we can see panic low and a quick recovery from there…”

Nifty had a Gap down opening after weak global markets and the selling pressure intensified as soon as 8470 level was broken. The movement on downside post that was a panic selling and Nifty at one point of time lost more than 200 points. An important observation is that not all the stocks participated in the selloff. HDFC, Infosys, ICICI Bank were major contributors to the down move whereas LT, BHEL, Metals that were looking weak earlier showed some resilience. This was a very peculiar behavior where a few stocks contributed to heavy selling.

As yesterday was cycle day low we did not rule out the possibility of panic low which happened. However, if this is indeed a panic low then we should now see a fast recovery from here as 54 days cycle low should be in place.

From options front, Nifty April expiry Call option of 8350 is now quoting at more than 100 points premium to that of the Put. This is one of the biggest premium that I have seen and I still continue to believe that prices eventually should rise once the current panic gets majority on the wrong side.

The Elliott wave structure looks to have changed to some extent where we are seeing a triangular formation rather than Diametric. In advanced concepts of Neo wave this triangle is known as Extracting triangle where the size of up move reduces and that of down move increases. The current down move has now become the biggest leg in the entire pattern which can be wave (d) of this triangle and now we should see an up push from here towards 8800 levels where wave (e) will be 76.4% of wave (c). 8800 is also the level of 61.8% retracement of the entire fall from near 9100. This level is also previous x wave which tends to provide good resistance to prices. However, first thing first, as of now we have not seen a positive close above previous bar high which is crucial sign for reversal in trend.

As shown on hourly chart, yesterdays low was exactly on the intersection of the channels and also where wave c = wave a. So the low near 8325 is going to be crucial and if the same is protected today it will become a spike low which we have seen provide very good support level that remains intact atleast for few days. The description I am writing here is exactly opposite to what I wrote few weeks back when Nifty made spike high at 9119 and indicated that the same should be protected for atleast few days if not weeks! Our stand was vindicated at the highs and now let see if Nifty indeed creates a spike low and starts showing upside move from here thereby getting the majority off-guard again!

In short, Nifty low of 8325 is very important. If the same is broken today and prices closes below it then the current downtrend can extend further. However, the low is the intersection of the channel, exactly on cycle low day and at Fibonacci projection zone. So, todays action is going to be crucial. A down move below 8325 will continue the current down leg whereas hourly close above 8410 will result into retest of 8470 on upside, post which some basing formation can be seen!

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