Tuesday, April 26, 2016

Nifty can continue to consolidate before a strong trending move!

Bottom Line: Nifty failed to move above the zone of 7980 – 8000 as expected and drifted lower. Short term trend will be sideways to negative.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

Nifty traded in red territory from the opening hour itself. Prices failed to show any positive attempt and broke previous week’s low as well. This confirms that the short term retracement of the up move from 7517 to 7980 has started.

As shown on daily chart, we have been bullish all the way from 6900 levels and turned cautious after seeing the corrective rise. An impulsive up move requires 5 waves internally that follows the impulse rules. Failure to show such internal counts indicate that the up move from 6825 can be a part of ongoing correction that started in March 2015.

The pattern that has tendency to break the trendline and still fails to show momentum is triangle. So there is a possibility that post the wave X seen near 8340 in October 2015, triangle pattern is ongoing and we are now in wave b of this pattern which is internally forming double correction in form of (a)-(b)-(c)-(x)-(a)-(b)-(c) as shown on daily scale. Also we can see respect for 76.4% Fibonacci level along with previous minor wave x from where the current up move has reversed. This level was mentioned few days back itself and prices are giving due respect to it.

Over short term, the up move in form of wave (a) from 7516 to the high of 7978 took approximately 5 days and so we should see wave (b) to continue atleast for 5 days or more. Wave (b) is now only 2 days old and it seems the high of 7980 should not be taken out atleast in this expiry which is also in sync with highest OI buildup at the psychological level of 8000 on upside.

In short, Nifty can continued to drift lower towards 7750 levels in form of wave (b) before the final push on upside in wave (c). Post that the downside pressure should start building up! 

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