NIFTY Sep 24th '12 to Oct 19th '12 - Analysis

In my previous post on NIFTY I had mentioned that the final elliot wave can take it to 5500 to 5550 levels http://analyzestockmarket.blogspot.in/2012/09/nifty-jun-4th-to-sep-25th-eod-analysis.html

During this period however NIFTY has touched 5720, I couldn't update my post with future targets as I have been on vacation. However this final phase has seen a great rally which shows amount of investors buying when the minute 5450 got crossed

In my previous post I had drawn the same Elliot wave phases mentioning wave 1 to wave 5 and with regression lines indicating a jump upto 5550. With heavy buying seen, NIFTY had beaten that target swiftly and is sitting at the high of 5720

Elliot Wave - Final wave 5 

Fibonacci Retracement/Extension Level

Each larger wave, has a smaller 5 wave phase and I have explained this in my previous post, you can refer the link given at the top to understand that in much better way

Going by that the last phase of "Wave 5" has again shown smaller 5 waves which I had mentioned couple of weeks back

Below given chart shows fibonacci extension level when we connect low of wave 2 and high of wave 3 i.e. 5332.1 & 5652.2 and so far NIFTY has touched close to 5728 i.e. 5720 which is 23.6% extension and if it touches 5770 then it will give38.6% extension

Similarly Wave 4 retracement ended at 5534.9 which is again by connecting wave 2 low and wave 3 high i.e. connecting again 5332.1 and 5652.2 and then drawing a retracement path and we see NIFTY has retraced 38.6% (5530) before climbing up to 5720 

Sep 24th to Oct 19th - Analysis

Technical Indicators

To summarize lagging indicators are all showing over bought levels technically and in next couple of trading sessions a correction is likely to set

RSI - Is already in over bought zone well above 70 mark

Force Index - Has shown steep increase in trend which may show decline any time

Stochastics line - Already well above the over bought zone for couple of trading sessions

Williams%R line - Again above the over bought zone level

Elliot Wave Analysis

NIFTY may start to proceed downward after hitting a high of 5720, may be another couple of more points possible to take it to 5750 to 5770 but then for the first 2 weeks of Oct a downtrend is seen which may take NIFTY back to 5350 to 5400 levels

Word of caution - Do not take any positions in NIFTY until Sep expiry, Oct month will have a bearish look and there is high possibility of NIFTY drifting down to 5350 or so

Road Ahead

1. NIFTY has strong support seen around 5400 to 5350 level, if that does not get broken then a larger wave 5 will take NIFTY to 5900 to 6000 level before this year end

2. If NIFTY breaks 5350 and goes below 5130 & 4974 levels, then as I mentioned earlier 4200 to 4300 is possible before year end or immediate first half of next year

However looking at the macro conditions and how situation is slightly improving globally 4200 or 4300 looks far away and the situation is slowly changing. 

Oct series has to be very careful we will sooner get to see decline happening even before the end of Sep series