Nifty gave a break above 5200 to head higher towards 5600!

Bottom Line: Nifty ended last day of the June in a spectacular way with a strong breakout above 5200 as expected!

Nifty Daily chart:

Nifty 60 mins chart:

Wave Analysis:

We have been constantly saying in our updates that the major trend for Nifty is up and a move above 5200 will strongly confirm start of next leg up. We have also re-iterated many times that important resistance or support levels are usually taken out with Gaps and we can see the same thing has happened on last trading day of the week and month. Prices have formed a strong base between 5030 and 5190 levels in form of wave ii and gave a strong breakout above 5200.

For long positions we have been constantly saying to follow a trailing stop of 5030 and 5090. Prices did not come below 5090 crucial level since we mentioned and never attempted to come near 5030.

Time wise wave i has taken 51 hours and wave ii has taken approximately 80 hours. Time wise wave ii = 1.618 * wave i. It is a thrilling experience to see how perfectly Time is also following Fibonacci ratio let alone the price.

As shown on 60 mins chart, we have now drawn a blue channel that connects the 0-ii line and a parallel line from wave i. This channel now should be respected and prices can find resistance around 5400 levels.

If we project wave i on upside the first target that we get is around 5370 - 5400 levels. If wave iii is extended the target comes to around 5700 levels (wave iii = 1.618 * wave i). Wave i looks perfectly subdivided and so wave iii might be non divided and can produce a strong thrust on upside. However it is too soon to comment the formation of wave iii as of now and followup rally after Friday’s action is important to observe.

As long as the Gap of Friday between 5150 and 5225 remains unfilled we will stay bullish.

The rally has been associated with strong reversal in INR and all currency pairs have moved perfectly as expected.

We now expect high beta midcap and smallcap sectors to catch up with Nifty. Failure to do that will be a first warning sign. The breadth of the market looks very good as on Friday with more than1800 stocks advancing against only 980 declining. We will warn our readers if we see any cautious signs from high beta sectors or deteriorating advance decline ratio.

Please note the alternate possibilities as shown in red on the daily chart, suggesting the current up-move as only a 3 wave up with wave c ending anywhere between 5370 to 5400 levels. Slower momentum in the current up leg as compared to that of wave i will help us to judge if this alternate possibility is developing. Either ways the bias is strongly up for now whether the rally is in wave c or wave iii on upside.

Positional traders can now trail their stop towards 5170 levels.

In short, the bias is firmly positive for now and Nifty can move towards 5370 – 5400 levels at minimum as long as 5170 is intact on downside. A break above 5400 will open up possibilities for 5600+ Any move below 5170 will be bearish and will force us to adopt alternate possibilities.