Nifty - Neo wave Diametric pattern and path ahead!

Bottom Line: Nifty moved lower in yesterday’s session as well but is now approaching close to the important channel support.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

Nifty continued to trade negative yesterday after opening positive near 9220 levels. The move on downside has continued but prices are now approaching near the important channel support. Fall in Sensex was more intense with prices moving down by 130 points and top contributor to the down move was Infy followed by Reliance Industries.

As shown on daily chart, RSI has already started showing negative divergence thereby confirming the outcome which we saw using other parameters like Moving Average difference oscillator shown few days earlier. From daily trading perspective it is best to follow bar technique. For trend to reverse we require close above previous bar high which is near 9226.

Nifty fall has been in overlapping fashion so far and the intensity is yet to be seen. This confirms that the overall pattern developing in the third pattern is extending further in the form of a Diametric pattern. The high made at 9274 was exactly at the channel we have been showing that completed wave e of Diametric and now the fall is in the form of wave f. Diametric patterns are 7 legged corrections with each leg moving in overlapping fashion. This is the reason why the momentum is not strong during the fall so far. There is a possibility that the channel can be whipsawed.

The short term support is near 9140 followed by 9080. Yesterday’s fall managed to protect this level so far. Let us see if there is attempt to protect the channel zone. Always remember that for strong uptrend to reverse series of negative price confirmations are important. Also there is zone of support between 9080 – 9140 levels. So, strong momentum below these levels is required for medium term reversal. Until that happens we can expect prices to drift lower but open up positive trend again towards higher levels near 9458 which is derived using Gann analysis on medium term charts and shown in the recently published Monthly update as it covers medium to long term perspective on global indices.

In short, trend for Nifty is negative unless we see a close above 9225 levels. Corrections in stocks are also overlapping so far which suggests that one leg on upside is possible after completion of wave f with 9080 – 9140 zone as very important support!

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