Nifty - Key reversal day and at inflexion zone!

The below research was published today morning before equity markets opened. For subscription to "The Financial Waves short term update" report on daily basis visit http://www.wavesstrategy.com/index.php/store.html  

Bottom Line: Nifty had a strong Gap up opening supported by ITC but prices gave away entire gain in same hour and filled the Gap.

Nifty daily chart: 

Nifty 60 mins chart:

Wave Analysis:

In previous update we mentioned that “In short, the trend for Nifty is going to be sideways and move above 8560 is important for positive trend to resume. Only a close below 8430 will indicate weakness and deeper retracement. The size of bar in either direction will be important to observe!” 

Nifty had a very interesting movement yesterday. Prices had a Gap up opening and immediately made a high of 8627 in the form of a spike and reversed sharply in the same hour touching a low of 8526 which is exact 100 points from the top. Spikes at times provide very crucial support and resistance levels. The high made at 8627 is now going to act as very crucial upside resistance and unless we see a close above this level the short term trend will remain sideways. FMCG sector was top gainer followed by Banking sector that managed to retest the morning highs.

As shown on hourly chart, there is a possibility that the wave (v) we have been expecting on upside might have completed at yesterday’s high itself. However, prices have so far not breached the support on downside. Normally such sharp movement is also termed as key reversal day if the follow-up action confirms it. It is better to wait for negative confirmation atleast below 8500 to confirm this key reversal bar. Normally it should be associated with high volumes which were not seen yesterday. Nevertheless, a close below 8500 followed by 8430 will confirm that an important top is formed. For now it is prudent to wait for break of levels either below 8627 or 8500.

Alternate possibility: The reason for showing alternate possibility is that wave v of c has now consumed lot of time compared to previous impulse up moves. So there is a possibility that the entire up move is in the form of double corrective pattern from the lows of 7730 and now prices are in second correction which is forming a rare expanding triangle pattern. A move above 8627 with increase momentum will raise the odds that these alternate counts are under play and higher levels can be seen towards the upper blue channel line.

In short, yesterday was an important movement from technical perspective. We have to wait either 8500 to break for negativity or 8627 to break for resumption of uptrend. Such range bound movement can continue to be frustrating but as highlighted earlier prices cannot continue in trendless manner for very long. A trend has to emerge soon!

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