Wednesday, September 20, 2017

What is next for Nifty? Elliott wave pattern and trend following system

Bottom Line: Nifty took out resistance zone of 10138-10155 which has open up further upside possibilities. Trend is positive.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In the previous update we mentioned that, “Nifty trend will remain on upside with 10040 as crucial support.Expect some consolidation and then 10252 is the next level to watch out for!”

Nifty opened near 10175 but quickly moved towards 10130 and then traded in a narrow range throughout the day. Majority of the stocks traded in sideways action after a positive opening. During such times intraday trading can be little challenging as the stocks do not exhibit necessary momentum after the opening hour.

On Nifty daily chart, we are showing a simple trend following method which is based on two short term Moving averages. If you look at the 5 days (blue) and 20 days EMA (red) prices have been managing to sustain above both the averages. Also throughout the trend which started from 2017 it was only in August that 5 days EMA moved below 20 days EMA but that resulted into sideways action instead of downtrend. Now the 5 days EMA is again sustaining above the 20 days and as long as this is intact the strategy will continue to be of buy on dips.

From wave perspective as of now wave c of the Diametric pattern is ongoing and post its completion we should see wave d which will be retracing a part of wave c.

As shown on hourly chart, prices are moving in upward sloping blue channel and are currently near the upper end of the channel. Therefore we can expect some consolidation to take place with 10040 as the short term channel support. Stock specific action will continue during this period.

In short, any dips should be utilized as buying opportunity as long as the blue channel support is intact. Prices can eventually head towards the Gann projection level of 10250 on upside as explained in previous update. Decisive break below 10040 will indicate that wave c is over and wave d has started. 

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