Nifty continues its dynamic and complex formation!

Bottom Line: Any move above 5180 will void the bearish implication of this pattern…However some sideways action can be expected!

Nifty Daily chart:

Nifty 60 mins chart:

Wave Analysis:

Indian markets continue to move in dynamic and challenging fashion. Corrections are always difficult to trade and forecast. It is the impulse wave that will lead to capital appreciation and preserving capital during corrections should be the aim. Since February 2012 Nifty has been correcting in a complex formation and pattern which are difficult to apprehend before their development. A simple correction like zigzag or flat are still tradable but when 2 standard corrections are connected by X wave trading is extremely difficult. Nifty has been moving in such a complex correction.

Nifty opened with a big gap down of almost 75 points with extremely weak market breadth yesterday. However, later the rally was triggered by sharp appreciation in Rupee and soft stance on GAAR. We are not yet sure if a significant bottom around 5000 is in place. First positive confirmation will be obtained on a move above Friday’s high at 5180 and strong second confirmation is obtained on move above 5280. This will confirm that next leg up towards 5800 has started. However unless these levels are decisively taken out 5000 can be retested again.

A move below 5050 will indicate the correction is ongoing and we can have sideways action to form a base before rally.

In short, it is imperative to wait for either 5180 to be taken out on upside for positivity followed by 5280 or 5050 to be taken out on downside for more sideways to downside consolidation. We still think 4900 is very crucial support on downside in case 5000 breaks.