Wednesday, April 15, 2015

Nifty sharp fall from 8800-8840 exactly as expected!

Bottom Line: Nifty continued to inch higher but the daily momentum is reducing and the bar size is getting smaller. It is time to stay alert!

The below research was published today morning before equity markets opened in "The Financial Waves short term update" by Waves Strategy Advisors. For subscription to this daily research report visit 

Nifty daily chart:


Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that In short, Nifty is at crucial juncture again. A strong momentum above 8830 will extend this rally further towards 8900 mark whereas break below 8680 will be first sign of short term exhaustion.

Nifty had a flat opening but later prices managed to cross above 8800 levels and closed near the days high at 8834. As mentioned earlier in the entire up move from the lows of 8270 not a single bar broke the previous days low let alone a close below the low. This is keeping the trend positive but prices have reached the zone of inflexion when one has to stay alert if there is sudden and sharp reversal. Also at the same time it is prudent to avoid creating shorts unless we see a close below previous bar low which is now at 8760 levels.

We have discussed about Neo wave - Extracting triangle pattern in previous updates. As per this pattern each up move gets smaller and down leg gets bigger. We can see that wave (e) has now reached towards 76.4% of wave (c) which is normally the Fibonacci relationship Indian markets are following. Along with this wave (e) has arrived exactly on the 49 days Time cycle which at times mark the turning areas. But Time cycle should be given 10% leeway and it is proved correct only after negative price confirmation which will be below 8680. Wave (e) has consumed 9 days but rallied by only 570 points so far as compared to wave (a) which rallied by 760 points in 9 days itself and protected the previous days bar low. This comparison is clearly showing that even though prices are protecting previous bars low it is not able to generate enough momentum that was seen during the formation of wave (a). On one bigger degree currently wave e of triangle is under formation and prices are currently in wave (e) of e so the rally looks to be in matured stage!

As shown on hourly chart, the up move started from 8350 has formed into double corrective pattern with wave c of second correction under formation. This wave c looks to be forming an Ending diagonal pattern which started from 8700 levels. So a faster move below this level will provide a strong negative confirmation that short to medium term trend has reversed.

In short, Nifty is in matured stage of up move and sudden reversal should not be a surprise. However, such sudden reversal should break 8700 and close below it. Because in many of the previous instances we have seen sharp reversal exactly on cycle day but prices somehow manages to protect important support area and closes above it. So a close below 8700 is must for short term negative confirmation. Next 2 to 3 days are going to be very crucial!

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