Waves Strategy Advisors: Nifty scenario analysis!

Bottom Line: Nifty continues to move in overlapping formation. Break of crucial levels are required for further direction!

Nifty Daily chart:

Nifty 60 mins chart:

Scenario 1:

Alternative scenario 2:

Alternative 3:

Wave Analysis:

We mentioned in previous update, “Existing long positions can use 5030 as stop loss on closing basis. A move below it can take prices towards 4960 as mentioned earlier. There is lot of events lined up over next few days. RBI monetary policy on Monday can result in high volatility on intraday basis. Greece election result over the weekend might produce gapping action on Monday.”

Nifty continues to move in a challenging fashion with no clear direction over past few days. Prices are moving in 1 day up 1 day down movement which we have observed before during down move of 2011. It is better to stay on sidelines during such movements as it will produce flux of emotions on both direction and making it difficult from trading perspective.

We are showing couple of probable wave counts. Scenario 1 indicates that wave v is over at the high of 5145 and prices have started wave ii on downward direction, probably forming a flat correction.

Scenario 2 shows that wave v is still ongoing probably in the form of ending diagonal pattern and might get completed near 5160 – 5170 levels.

Scenario 3 shows that wave 1 was completed at the high of 5050 and wave 2 has been correcting wave 1 in the form of running correction with 1 minute leg c pending on downside.

Either of the scenarios is indicating atleast one minor leg down is pending. However we do acknowledge the fact that the major trend is up and if momentum gains on upside direction that will indicate wave 2 is over at the low of 5050. A move above 5170 – 5180 will force us to adopt the possibility that next leg up has started.

The advance decline ratio is not so strong that we normally see before strong up moves and midcap & smallcap indices were positive by mere 0.5% which normally outperform major index during good rally.

It will be important to see the reaction on RBI monetary policy on Monday and it is advisable to follow the levels on closing basis.

In short, longs can maintain the trailing stop of 5030 levels. A move above 5180 will indicate wave 2 is over and next leg up has started. Next few days of price action will clarify which of the above probable scenarios are under formation.