Nifty in matured downtrend! Elliott Wave analysis

Bottom Line: Nifty gave strong Gap up opening but failed to sustain the gap indicating that the trend remains negative!

Nifty daily chart:

Nifty 60 mins chart:

Wave Analysis:

We mentioned in previous update, “For some meaningful bottom to form it is important for overall breadth to improve and prices should form bottom reversal pattern that has not happened so far. In short, we will be closely observing how prices react from 5580 level to decide if consolidation can be expected. Failure to show any reversal signs will indicate there is more steam left on downside. For now the trend continues to be down as long as 5720 is intact on upside.”

Nifty had a strong Gap up opening yesterday and prices made a high of 5718 very close to the mentioned level of 5720. However, for the 3^rd time prices failed to sustain the sharp up move and closed negative. This will lead to bulls finally giving up exactly at the wrong time.

As shown on the daily chart, prices are now close to the support of the blue trendline and it is therefore necessary for existing short positions to have close stops in place to lock-in the profits in case reversal happens. Fresh positional shorts should be avoided at current levels unless a severe selloff starts and take prices below 5550 levels. Nonetheless, the trend remains negative but we are cautious as a few index heavy weights have arrived at their crucial multiyear supports and there are positive divergences seen across the time frames in those stocks. Also a move up from here on Nifty will give positive divergence on daily and 60 mins chart as well.

Over short term, prices have closed near the day’s low and the upside Gap failed to sustain thereby maintaining our bias negative. As seen on 60 mins chart, prices broke the downward sloping channel on upside but re-entered into it. It will be extremely important to observe how prices move from around 5580 – 5600 levels on downside.

In short, our bias continues to be negative as prices have failed to show a blue bar since past 7 trading days but we will be cautious on short positions due to some loss of momentum on downside. However, only a move above 5700 will indicate positivity.

To view the daily charts and important levels on Nifty as well as blue chip stocks subscribe to "The Financial Waves" by Waves Strategy Advisors. For more information visit www.wavesstrategy.com or write at helpdesk@wavesstrategy.com. Call on +91 22 28831358 / +91 9920422202