Bottom Line: Nifty formed an inside bar
yesterday which indicates short term pause to current rally.
Elliott Wave perspective: As shown on
daily chart, prices are moving in wave c of wave (e) of wedge pattern. Wave (e)
looks to be forming a Flat correction with wave a ended at the top near 6230
levels, Wave b at the lows of 5580 and wave c ongoing on upside. Wave b of this
Flat correction retraced around 90% of wave a. There are different variations
in Flat corrections and if wave b ends within 61.8% to 100% of wave a it is
called regular Flat correction. The strength of wave b helps us to evaluate how
far wave c can go. In case of regular Flat correction chances are high that
wave c will reach the level from where wave a started in this case it is 6230
or can also exceed this level by around 23.6% – 38.2%. Also wave c can tend
towards equality with wave a which is near 6300 levels. This is also the level
where strong wedge resistance line is placed. So the upside projection for this
up move is anywhere between 6200 – 6300. We will closely monitor how prices
react from those levels if it reaches there. Over short term, as the current up
leg retraced the previous minor down leg from 5850 to 5570 in faster time
advanced Elliott wave concepts suggest there is very high probability of start
of wave c towards 6200 levels. However move below 5700 will indicate some other
scenario is ongoing and the current up move in just another wave x but this
looks very low probability as of now and the characteristics of rally from 5570
to 5900 looks impulsive rather than corrective in nature with strong
participation from broader markets. X waves takes more time and travels less
distance and are lead by only few stocks. So this increases the odds that the up
move is impulsive in form of wave c of (e) and not an x wave.
As shown on 60
mins chart there is minor breach of the short term channel. Break of channel
should never be criteria of taking a trading position since channels can break
during sideways consolidations as well. It is always important to wait for
break of crucial supports or resistances before taking a trading decision....
To read more about Nifty Elliott wave research subscribe to "The Financial Waves short term update" by Waves Strategy Advisors. Visit www.wavesstrategy.com
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