Nifty Weekly chart:

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

Each point of Nifty has been on the blue channel since the start of correction in 2008. This confirms the basic assumption that the entire rise post that year has been corrective fashion. As per advanced Elliott wave – Neo wave concept, a perfectly channelized move is not a characteristic of an impulse pattern. This means that the correction that started in 2008 is still ongoing and we are in final leg of wave [E] of triangle pattern. On a logarithmic scale the pattern is clearer and one can see a running triangle. However, trendlines are more important on arithmetic scales.

In the recent downtrend we can see break below the red trendline as shown on the weekly chart. It is rare to see a downward sloping trendline gets broken itself on downside and happens once in many years. This situation arises during a panic scenario and the last week movement is a perfect example of that.  Nevertheless, 6750 – 6800 level is the final line in the sand and a movement further below this will force us to adopt much bearish scenario as it will be close to be breaking the lower blue trendline support as well. It is not often to see such type of movement unless the bear trend is going to extend by few more years. In, Indian context we have not seen a downtrend lasting for more than 14 to 15 months. Even the fall in 2008 started from January 2008 and made panic low in October 2008 lasting only 8 months from top to bottom. The correction started in November 2010 ended in December 2011 lasting 14 months. The recent correction is now 12 months old already.

As shown on 60 mins chart, prices are moving lower in double corrective pattern from the level of 7600. The first correction was a Flat correction. A Flat correction has to be followed by either a Flat or a triangle as the intensity has to reduce if our pattern reading is correct. This means that if wave a of second correction is in place than wave b should bounce back atleast towards 7060 to 7110 zone. Failure to do that and a break back below 6850 will be strongly bearish.

This week movement is going to be very important and we are keeping a close eye on each wave movement. Many of the monthly cycles were also due in last week and if prices do not respect time then we are indeed into very big bear trend. As of now we continue to believe that what has worked in the past is going to work unless it is proven wrong. Let us see if there is indeed a push above 7060 followed by 7110 in this week and the low remains protected which will then be termed as a panic low. However, post completion of wave b on upside there will be wave c which will come close to the retest of the recent lows. A faster retracement above 7250 will indicate that a very important low is in place and surprises will be on upside.

In short, this week’s movement is crucial. Break below Friday’s low followed by 6800 will be strongly bearish but we can expect some pullback or consolidation in this week. On upside crossing above 7060 – 7110 is important to reduce the downside pressure. Faster retracement above 7250 will be first indication that a major low might be in place.

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