NIFTY has shown a wave pattern which can be interpreted in two ways. I would like to present both the scenarios for us to understand the entire move so far in a much better manner.
Infact this understanding is not only necessary to look at past graph performance however we can also predict as to what may happen as well after this
Scenario 1
Scenario 1 has accomplished the 5 wave impulsive pattern that is part of Elliot wave analysis. Infact the slide down from wave 3 to wave 4 was steep enough but managed to get retraced by only 50% according to fibonacci retracement level
Wave 4 did not retrace below wave 2 and started its wave up high to what you see today at around 5380 level
Scenario 2
Instead of assuming that Elliot wave has gone through a complete 5 wave movement totally, scenario 2 offers you the perspective of wave 5 pattern getting over from 4770 to 5348 and then follows a corrective wave pattern of A,B & C which is from 5348 to 5032
Again a 5 wave impulsive wave starts which connects 5032 to current level high of 5387
The beauty of scenario 1 and 2 is that it confirms the final upward movement of wave 5 according to Elliot wave theory and should get over anytime this month, and from thereon we should see a fall back to 5000 and levels below that
In my initial analysis I had given 4700 estimation basis what NIFTY had done earlier to charts, however now the entire picture has changed and it is not so sluggish as it appears to be
However NIFTY has strong resistance between 5420 and 5435 level and in my next post I'll blog more about entire NIFTY pattern from 2006 till date
Technical Indicators
Looking at leading indicators Stochastics and Williams%R the situation looks over bought however on the other hand RSI has still some room left to move up.
What this denotes is we will have further run up post a small dip and that should not be a major correction rather just a small one to balance the charts technically
On the other hand trend indicators TRIX, MACD and Parabolic SAR are still very positive on charts and that shows that we will have some more run atleast until 5435
Summary
1. Go long until you see NIFTY touching closer to 5420 to 5435 levels and then do not take any fresh positions there as it is the last stage of NIFTY moving up.
2. We may not see this level back and we should exit our long positions as you see NIFTY rallying up
3. A possible correction may take NIFTY anywhere between 5335 to 5350 but not beyond that however on the upside if 5435 gets broken out then 5460 is possible
4. One of the key indicators to watch is, RSI reaching over bought zone which has not yet happened and once that gets to over bought we can clearly say that decline will start from thereon and it is then at that point you can short NIFTY
Note: Obvious and million dollar question is can someone short NIFTY now?. Answer to that question is, it is not the right time to do it. Allow NIFTY to move up further may be beyond 5400 and then close to 5425 to 5435 levels I can suggest whether it is wise to do it.
For sure after this movement up, NIFTY may not be able to show these levels again in Sep or Oct or even Dec end
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