Wednesday, May 14, 2014

Elliott wave on Nifty with detailed scenario analysis on weekly and daily charts!

Bottom Line: Indian Equity markets look to be giving a big Thumbs UP to upcoming election outcome. Exit polls even though unreliable only added fuel to fire!

The below research is published by Waves Strategy Advisors in daily publication "The Financial Waves short term update". In addition to Nifty there is detailed analysis on Bank Nifty, Reliance Industries big triangle breakout and Grasim Industries. For subscription options visit

Nifty Weekly chart: Scenario analysis 

Nifty daily chart:
Wave Analysis:

Nifty had a Gap up opening yesterday of nearly 70 points after the exit polls declared a clear victory by BJP led NDA and the worse performance by Congress after many years. A Gap up of this magnitude is seen after a long time and the daily chart shown above clearly highlights such movement was not visible since the rise of 5980. It seems past week was relatively quiet except Friday when Nifty showed a spectacular up move of almost 200 points. Move of such magnitude cannot terminate an existing trend and there is more steam left to the rally.

Even though the move has been largely driven by the event the steepness of rally indicates positive sentiments so far. On weekly basis, previous week’s low near 6640 is extremely important and as long as this level remains intact the medium term trend will be positive. A simple bar technique combination is important along with Elliott wave from trading perspective especially when markets are at life time highs as there is no previous price resistance zone.

The Elliott wave counts is suggesting 2 different possibilities. Prices have either completed the 6 year long correction since 2008 in form of triangle and next big leg on upside has started or currently wave (x) is still ongoing. If the steepness of rise continues even after 16th May the odds will drastically increase in favor of triangle pattern and start of next Bull Trend. Nifty daily chart shows internal wave counts over short term. Even if the up move is in corrective fashion the trend still remains positive as long as 6850 is protected on downside. This level is close to previous pivot high and also near 61.8% retracement of move from 6836 to recent high. So as long as 6850 is intact please refrain from picking a top as the momentum is very strong so far.

On upside 7250 level can result into minor profit booking as this is near the channel resistance and also the first corrective pattern w = 2nd corrective pattern wave y near 7220 level. So this zone can be next possible target on upside. On downside the psychological level of 7000 is now important support. Break below this will result into sideways consolidation rather than downside since a rally of such steepness cannot terminate a major trend on upside unless it’s a blow off which is very euphoric and rare.

In short, either of the scenarios impulsive or corrective suggest that the trend as of now is positive and volatility can be on rise as we are near the major event. It is everyone’s guess that market has completely discounted Mr. MODI victory or once the news is out as expected there will be a euphoric rise atleast for 2 to 4 days. A detailed explanation on the election analysis is given in current Monthly’s report. Unless there is negative close on weekly bar below previous week’s low the trend will remain positive on Nifty!

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