Thursday, June 10, 2010

Nifty Elliott Wave Analysis: 9th June 2010 (for 10 June 2010 onwards)

Elliott Wave Interpretation: The down fall that started from 5397 level, is what I believe to be started for next leg down for market - this can be probably be Primary Wave C or Primary wave 3 for the market. But, that would call for a longer discussion.

Immediate downtrend interpretation: The down trend from 5397 to 4787 is what i have considered as Wave 1 (i have seen many places that this is named as something abcxabc); but i believe this is an impulse action with Wave 1 taking the shape of Leading Wave (since wave 4 enters the territory of wave 1. After the low of wave 1 at 4787, an upward move started, which I consider to be wave 2. Now, wave 2 generally retraces 61.8% to 80% of wave 1.

Now distance covered by wave 1 is [5395 - 4785] = 610 points say 600 points in a span of 48 days (including weekends this is just the total number of days). So based on a 61.8% retracement of wave 1, Nifty had a target of 5155 and 80% retracement a target of 5265. Nifty made a high of 5135 on 4th June 2010. This is 20 point short of 61.8% retracement. That can an acceptable retracement level for wave 2 (for now can be considered).

So considering a scenario that wave 2 have been retraced, we can see a commencement of wave 3. Based on that consideration, wave 3 can be 1.618 of wave 1 which means 1.618 x 600 = 970 (points) from that start of wave 2 (5135). In that case target for wave 3 ideally can be level of 4164. I believe, the wave structure is inline for this target.

Based on the commentary on the chart, there is a Head and Shoulder structure possible with Left Shoulder, Head and a Right Shoulder (underconstruction) with neckline at 4940. A break of this level with volumes, I expect a target of Nifty of 4745 (which would have a Stop loss above the neckline zone). So considering the low of wave 1 is breached on account of this HnS structure, then I would be confident about the target of Nifty at 4164. Now, assuming this fall has commenced, it is not goin to a straight line, but it wil have bounces within its path.

Scenario 2: Considering wave 2 has not completed, in that case, market should bounce at 4940 level, and above 5140 level, there can be a separate Inverted Head and Shoulder pattern for the market with a target of 5400 level, that i cannot rule out. However, for that, market needs to break the high made.

Scenario 3: We are in wave 2, but wave has not ended. As u can see the upside move of wave 2 has been 3 waves a(5070)-b(4940)-c(5135). Now, assuming that we are still in wave 2 and wave is a Flat correction, in that case, based on HnS target og 4745, Nifty's fall stop at previous low of wave 1 at 4785, from where Nifty shall again go up in 5 wave up move. That would also be an ideal scenario based on a time scale analysis. See, the time required for Nifty fall has been 48 days. Considering this 48 days at 0.618 time line and wave 2 to occupy 0.382 time scale so that wave 1 and 2 make up time line of 1x. In that case, wave 2 calls for 30 days of upmove from 25 May 2010. So 30 days more would be 25 June 2010. Also, we know in Flat Wave all waves are generally equal. Putting that for time scale, in tht case, wave A from bottom of 4785 to 5135 has taken 11 days, so 3 wave of equal time line would have mean total time for 3 wave would be 33 days. This is nearly equal to time calculated under first scenario of 30 days. In that case, this Scenario is most likely with possibility of Nifty reaching 4785 by 16 June 2010 and by month end Nifty again reaching 5155 to 5200 levels. This can be an ideal scenario, as it fits both time and price and structural equation. 

Nifty Chart: 30 Min chart

 Nifty EOD Analysis

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