Friday, September 7, 2012

Nifty - Elliott Wave Update

Daily Chart
Nifty had a huge gap up today, there might be some compelling news item flashing on the screen of Business News Channels or may be not. But we had every reason to anticipate an up move from the 5215-5200 levels. We had discussed this possibility plenty of times in past few days, and finally we got what we wanted, we have now broken out of the falling channel of wave [b] or IV? as per the alternate count. We should now rise in wave [c] of III or wave V? as per the alternate count. But how do we make out which count is playing out here. The answer is quite elementary.
Both the counts are suggesting that we should see higher prices in coming days. But in case of our alternate count, we can see that wave III? is shorter than wave I, which means wave V? cannot be longer than wave III? (recall the "3rd" wave is never the shortest rule of EWP). SO by projecting wave V? == III? we get a target level of around 5630. Which means if we are in wave V? we cannot break out above this level of 5630, and that mean we will be forming a truncated wave {C}.
On the other hand our preferred count suggests that we are actually in wave [c] of III, which can end in the vicinity of 5630 or even go above, that will make our wave III longer than wave I, and then we can look forward to waves IV and V. 
What are the trading implications then? Well we should be very very careful of the price action once we near 5630 levels. I case of our alternate scenario, truncation in wave {C}, we will fall very sharply, and that may not give us much time to adjust. But if we cross 5630 then we can be sure that we are going to get at least another set of 3 wave up move in wave V. 
So right now trail your SL till we near 5630, and once we reach there, watch the prices like a hawk for further development.


  1. Between I And III. or III.a. rsi posted negative divergence... not acceptable imho....

  2. It has happened before. Also wave [c] of III may take prices and RSI higher. An ED has part corrective part impulsive properties.