Nifty looks to be forming short term low, What is next?

Bottom Line: Nifty showed sharp recovery on upside and closed exactly at the level of 9615. It seems the down move was only wave x again!

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

Nifty had a Gap up opening near 9588 and prices managed to sustain the Gap throughout the day after showing a brief dip towards 9544 levels. Closing had been at the day’s high and buying was seen across the sectors. Looking at such sharp move this opens the possibility that the down move of past 6 days was only another wave x of the complex pattern.

Looking at the steepness of rise and that too near the time cycle lows there is now high possibility that the down leg is now complete over short term and we will start seeing positive attempts again. 55 days Time cycle has now completed 51 days and so some sideways action cannot be ruled out. The correction looks to be ending in form of sideways rather than downside. We mentioned about sideways action also as a part of correction. So on a net basis Nifty has not moved anywhere over past 8 days.

The reason for citing the fall as wave x is that it either during the fresh leg on downside or wave x formation we see extreme readings on indicators not seen earlier. This time as well we saw negative weekly bar formation and daily prices breaking decisively below 20 days EMA which was not taken out anytime during the entire trend. Even after that the downside pressure did not build up. Such type of behavior hints that the down move was wave x. This is a typical characteristics of wave x I have seen over years. We have therefore tweaked the wave counts in order to accommodate for the recent price action.

As shown on hourly chart, the fall looks to be in running triangle a-b-c-d-e and the last leg within this is retraced back in faster time thereby indicating that wave x might be over. Any pullback towards 9550 – 9560 can be used as buying opportunity with 9450 as stop from positional perspective. This will provide good risk reward for long positions.

In short, during fast moving markets one should be quick in booking partial profits and trailing remaining to ensure something is taken off the table in case there are sharp reversals like yesterday. Trend looks to be now turning back on upside given that we are coming nearer to the Time cycle lows. Use dips as buying opportunity!

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