Tuesday, March 29, 2016

Nifty moving in “No Trading Zone”…Is it an impulse pattern or only corrective rise?

Nifty has been all over the places over past few days and a few stocks from Metal, Pharma and Realty space showed sharp decline after a strong rise. This has created an environment of confusion with lack of clarity whether the uptrend that started from 6825 is still intact or the same is over.

By using Advanced Elliott wave principleNeo wave we can apply the rules to first understand the pattern under formation. The first stage of bifurcation will be whether it is an Impulsive pattern or Corrective pattern? Now look at the below chart and try to see if in the entire up move you can count 5 waves which will suggest the ongoing pattern is impulsive in nature with all the rules being applied.

Nifty,Impulse Pattern,Elliott Wave,Neo Wave,Corrective Pattern,

Impulsive rise? Given the steepness of correction and the overlap of the down move from 7750 to 7580 this indicates that the rise is only in 3 waves and not 5 which is the minimum basic requirement of an impulse pattern. So now we cannot expect wonders to happen on the upside given this basic fact. Let us now proceed to identify which corrective pattern is under formation

Corrective pattern – Zigzag pattern has 3 waves with wave b should take more time than the preceding impulse pattern as per Neo wave principle. Now we can see this in the above chart where wave b has taken more time marked between the first two arrows. To get a confirmation that the pattern under consideration is over we require faster retracement below the last rising segment as per the 2 stage confirmation technique. Looking at the above chart we can see that so far the fall has not fully retraced the rise in form of wave c from 7400 and so the fall can be either wave x or some other pattern is forming. This now raise the odds that wave c is either not complete and forming Ending diagonal pattern or the entire pattern is developing into Extracting Triangle. 

Confused? This is exactly what markets are doing as there is no confirmation. The recent fall has opened up number of possible scenarios and it is only on faster move above 7750 or below 7400, clear trend confirmation will be obtained. At times one has to wait for clear directional signals rather than jumping at every move. This is one such time!

Our clients have been able to capture the most of the trend and it is now time to relish what is made rather than giving back everything during times of confusion when the pattern under formation is not clear. You can now see the pattern under formation on daily basis in our flagship product “The Financial Waves Short term update”. To subscribe visit the Pricing page.

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