Elliott Wave is simple yet powerful Technical analysis study that can help traders or investors take trading decisions objectively and see where the markets are headed.
Below chart of Nifty Elliott wave pattern is shown along with highest open Interest buildup to gauge the smart traders and option seller’s activity.
Nifty 30 Minutes chart:
Neo wave pattern: Nifty formed a triangle pattern and completed wave (e) of triangle near 17600 levels. Post that there was a sharp decline on downside in the form of wave a-b-c. The wave c took prices towards 16200 levels from where we are seeing consolidation or attempt to pullback. However, prices are failing to show any strong rise and 17000 call option is already having a lot of buildup. So the current rise can be only wave x or wave d of a Diametric pattern.
Open Interest analysis – We can see high OI buildup at 17k calls and 16k puts. These are obvious areas for the rise in OI but any sharp reduction in the OI at these psychological levels will hint towards nervousness and possible trend in that direction.
If we combine OI along with Elliott wave – Neo wave we can make out that as long as 17000 is not broken decisively on upside the rise is going to be a temporary pullback and in corrective pattern. Only a sharp rise above 17000 level will suggest deeper pullback.
A faster retracement back below 16200 will strongly indicate next leg on downside is resuming and one can start buying puts despite of rise in VIX (Volatility).
In a nutshell, Nifty stands at crucial juncture and options sellers expecting a broad range for now. 16500 is immediate support and breach below that will make bulls nervous. Thus by combining wave theory along with OI one can trade with an Edge and if this technique is combined along with Time Cycles it can result into perfect trade setup which will end your search for a complete trading system with very high accuracy.
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