Nifty turned exactly on the 8th day with a spike up, the way we were anticipating!

Nifty Daily chart:

Time Anticipated on 29th November:

Happened: Rally terminated on 8th day, just took 1 more day than we anticipated!

Nifty 10 mins

We mentioned before on 29th November that “a close observation of the above Daily chart reveals a very important fact that in all prior instances (since the fall started in November 2010), after every steep move down Nifty rallied fiercely up for 6 to 7 days and ended that rally with a spike. It then turned down on the 7th day taking back prices to where it started matching the momentum of uptrend. The magnitude of rally has ended between 38.2% - 50% on prior occasions. If the similar pattern and cycle has to continue we will rally for 4 more days (2 days of rally is complete) till 4940 levels and should turn down from there with a spike.”

The magnitude of correction this time exceeded beyond 50% but Time and characteristics of upside correction was exactly like what we expected. The uptrend lasted for 8 days, took 1 extra day to complete the upside correction than we anticipated but turned by making a high near 5100 – exactly 61.8% retracement of previous down move. Nifty turned immediately from there on 8th day itself with a spike i.e. on Wednesday and we can see a steep selloff that happened yesterday.

Also in our previous days’ report - The Financial Edge published by Waves Capital we mentioned that “In short, we will now wait and watch if Nifty closes below 5000 for further downside move or manages to move above 5100 before going down”. We have been very accurate in catching this turn as well. As soon as 5000 was broken the selloff went to as low as 4925.

As shown on 10 mins chart, we have started a down move within the red channel which can make a new low at 4640 but it is too soon to commit that. We would see for a follow-up selloff today and a close of gap at 4850. As long as 5050 is intact we now see the current downtrend as either wave (b) of b or next leg down in form of wave c. Either of the scenarios indicates short term downtrend for now in Indian Equities.