NSEMidcap index: Applied Fibonacci ratios, identify an impulse pattern and forecast the trend!

NSE Midcap index has moved higher impulsively from the lows of 6500 since September 2013.

The entire up move has been very clearly divided in 5 waves so far unlike Nifty that has shown corrective behavior.

An impulse pattern behaves in a peculiar way and it is very easy to identify them. The forecasting and accuracy also increases during its formation. The below chart will help you understand the impulse move in NSE Midcap index along with probable price targets.

NSE Midcap Index Daily chart:

Waves Analysis:

The below excerpt is picked up from the daily research report “The Financial Waves short term update” – our flagship product that identifies the trend on Nifty, stocks and indices along with detailedElliott wave counts, applied technical analysis & crucial support & resistance levels.

As shown on above chart, prices are currently in wave 5 and wave 4 formed an irregular Flat correction pattern. The wave c of wave 4 completed near 10940 on 16^th October and since then wave 5 is ongoing. Prior Wave 3 traveled to very close approximation of 2.618 times wave 1. This adheres to the guidelines of Elliott wave theory very well.

Also we can clearly see strong alternation between primary wave 2 and wave 4, where wave 2 consumed less time compared to 4, wave 2 was a simple corrective pattern whereas wave 4 formed Irregular Flat pattern, wave 4 was more complicated compared to wave 2.

Initially we expected wave 5 to complete at the high of 12000 but looking at the slower fall post 5^thcompletion the current structure looks more probable. The ongoing wave 5 can now reach near 12100 zone which is 61.8% level of wave 1. However, as wave 3 has been extended to the extent of 2.618 there is also a high likelihood that wave 5 can truncate or form double top. The reason being lot of power is already consumed during the formation of wave 3 and so the current trend will lack the strength. This is also visible with negative divergence seen on RSI between wave 3 and wave b of 4 that touched new highs.

In short, NSE Midcap and broader market is currently moving higher in final primary wave 5 which can complete near ……….Break of 2-4 trendline will be a strong negative confirmation!

Subscribe NOW to the daily research report and see for yourself the probable upside targets for Nifty and stocks. Also see the maturity of trend from short to medium term basis. For subscription options visit http://www.wavesstrategy.com/index.php/store.html

Elliott wave: What is Elliott wave theory and its Basic tenets

What is Elliott wave? Basic tenets of Elliott wave principle

In the 1930s, R.N. Elliott discovered that the stock market moves in recurring patterns that he called waves. He formulated the Wave Principle based on these wave patterns called Elliott waves.

Humans behave in a manner, when given a stimulus, in similar and probabilistically predictable fashion. This behavior of acting in similar ways makes us no different than the other creations of nature. Freely traded markets are the only sources that reflect the collective behavior of humans and the current social mood. Highly liquid markets cancel out the random events and what is left is the social mood of the mass and that indicates what we can expect in the future. We believe that any freely traded markets like Equities, Forex, Commodities move in the form of repeatable wave patterns that exhibit fractal nature at various degrees. This behavior was first observed by Ralph Nelson Elliott in1930s. This study of waves is now famously known as Elliott Wave.  

Ideal Elliott wave chart:

Rules of Elliott wave:

a. Wave 2 cannot retrace complete of wave 1
b. Wave 3 cannot be the shortest of waves 1 and 5
c. Wave 4 cannot enter into territory of wave 1

All of these rules have been followed.

Guidelines of Elliott wave:

a. Wave 3 is usually the longest and can be 1.618 / 2.618 times of wave 1 or larger if extended
b. Wave 4 will usually form a triangle
c. Wave 3 if extended, wave 1 and wave 5 will trend towards equality
d. Wave 5 and wave 3 will usually show negative divergence which indicates loss of momentum and break of 2-4 trendline will confirm impulse 5 waves up is over and 3 waves downside correction has started.

There is much more to this Elliott wave theory along with practical applications. Subscribe to any of our research products and get instant access to 1 hour of Elliott wave Educational video byAshish Kyal, CMT absolutely FREE! For more information visit www.wavesstrategy.com

Useful for: Learn Elliott wave theory, Elliott wave principle, Basic rules of Elliott wave

Related to: Elliott wave