Using Gaps and Time to identify Elliott wave counts & market direction!

Using Gaps and Time to identify Elliott wave counts & market direction!

By Waves Strategy Advisors, To subscribe visit www.wavesstrategy.com

Gapping action is very common on our major index – Nifty or Sensex

Gaps are the area where technically no trading takes place and is a void space between 2 price levels. Normally traders use Gaps to identify if it is a Breakaway Gap, Exhaustion Gap, Runaway Gap and form trading strategy. We take a step ahead an use Gaps to identify the nature of rally whether it is Impulsive or Corrective from Elliott wave perspective. In today’s morning daily equity research report we have used Gaps and Time theory to understand the direction of market. Indian equity markets are very dynamic and volatility is on the rise. Anticipating in which direction trending move is going to take place is the key to trading success!

Read below to understand more on how to use Gaps to identify if the wave is Impulsive or Corrective in nature:

Nifty 10 mins:

Wave Analysis:

Gapping action provides very important clues to the direction of market. Corrective Gaps do not last for long and get filled either on the same day or next 2 days whereas impulsive Gaps provide very important supports to prices. Market has very well managed to protect the Gap between 5700 – 5760 that took place on 27^th June 2013. Prices took support exactly at 5760 level and bounced back after Gap down action on Wednesday. Whereas the down Gap created on Wednesday almost got filled yesterday. This clearly indicates that the up Gap is still open whereas the down Gap is getting closed quickly. This itself is a classic indicator for the direction of trend i.e. on upside.

From Time perspective (Advanced Elliott wave concept), as we mentioned before the up leg (wave i) retraced the complete down move from 5900 to 5600 (wave z - 6 days) in just 3 day’s time and past 3 days of fall (wave ii) retraced only 38.2% of this up move from 5600 to 5900 (wave i). In short, the up moves are retracing the prior down leg in faster time further indicating that the medium term trend is positive. In impulse pattern corrective waves normally takes more time than impulsive waves. Yesterday’s reaction at 2pm occurred exactly on Time equality with minor wave i and there is a possibility that wave ii ended in truncation at 5790 levels 2 pm. On very low degree the minor move from 5840 to 5790 took 30 mins and the same has been retraced back completely in next 30 mins thereby maintaining the time balance of retracing the previous down move in same or lesser amount of time indicating that the minor trend has also probably turned positive.

Existing long positions can now ………..

Today’s morning research report is much more exhaustive than this. It shows the Elliott wave counts on Daily, 60 mins chart in addition to 10 mins chart. Also there is an important reversal pattern – Head & Shoulder, Fibonacci projection, Wedge pattern, Time and Gaps everything combined together on Nifty with very clear and objective conclusion to the direction of market. You can subscribe this report “The Financial Waves short term update” for only INR 2000 pm and get daily research report on your email id. Subscription can be done directly from http://wavesstrategy.com/payment/ For more information write to us at helpdesk@wavesstrategy.com or call us at +91 22 28831358 / +91 9920422202