Bank Nifty: Elliott wave counts and probable scenarios!!

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Bank Nifty has been underperforming major index Nifty since May 2013.  From May to September 2013 index has moved down from 13500 to 8500. 

Thereafter, it has recently bounced back from 8500 levels and retraced more than 50% of the previous down move.  Failure to sustain at higher levels indicates that recent bounce was just short covering and major trend remains same.

After sharp bounce in Bank nifty many market participants had an impression that index had completed down move and started the next move on upside. However, sharp reversal from the middle of trend has left with probable scenarios as per Elliott wave counts which is shown below..

Bank Nifty Daily chart:

Waves Analysis:

The following was published in “The Financial Waves short term update” daily research report.     

As per wave perspective, we have observed the following things in the price action:

·  As per Elliott wave theory, wave 4 should not enter in to the territory of wave 1. But this up move has already entered into the territory of wave1 which was placed at 11000. Hence, this cannot be wave 4.

·  On other side, if this up move was wave x, then it would have been reversed from the channel resistance which was placed at 10400. So there is high probability that the up move was only wave a of x and not complete wave x.

·  The up move from 8300 to 11200 was very sharp in nature and took only 11 trading sessions. This type of price action may be indicating that the fall from 13500 to 8300 was in the form of intermediate wave A and has now started wave B where minor wave a completed at 11200. The ongoing correction is in the form of minor wave b. In short, it may create a “Flat Correction Pattern.”

The above mentioned are the probabilities and future price action will provide more important clues for Elliott wave counts.

Now we know that Bank Nifty move is corrective in nature. Next question is which pattern it will form in the coming trading sessions? We are closely monitoring the price of action and movement of Bank Nifty. To get preferred wave counts in Bank Nifty over short term get instant access to our equity research report- The Financial wave STU which also covers short to medium view on Nifty and opportunity based stocks. For more information write to us at helpdesk@wavesstrategy.com or call us on +91 22 28831358 / +91 9920422202 or visit http://wavesstrategy.com/index.php/store.html