23 July 2012: Nifty Elliott wave analysis: You can expect a fall towards 5160. Break below 5160 will give target at 5127 and then may be even the test of 200 DMA @ 5096.

You must read previous articles and watch above chart carefully to understand this article completely.

Today’s outlook: -

It the completion of wave ‘B’ which was corrective up and just sustain for 2 days. From Friday onwards it was the development of wave ‘C’ which is downward in nature. I have already quoted that break below 5209 should be decisive.

Right now we are looking for the test of 5160. If Nifty start sustaining below 5160 then we will see some major concern as it may result the test of 5127>5118 too.

We generally know that hike in Diesel price can be bad for stock market but this time market will fall if hike does not come. Charts are telling us that if we start trading below 5127 anytime anyday then we will see the retest of 200 DMA which is at 5096.

I have quoted this many times in past also that frequent test of 200 DMA is a sign of weakness.

Best technical indicator of NIFTY: (You must note it) – 200 days moving average – Watch the trajectory. After 20 May 2011, it started rising from 5 June 2012 only. (It was not rising even in Jan-Feb rise). So the rally continues from 5 June 2012 itself.

Wave development : -

First view is wave c = 1.618* a = 5343 (Already stated on Friday too in my intraday updates.

Second view is wave c =2.618* a = 5496 (Things can never be so simple in stock market as it looks on charts.)

Take another calculation, wave 1 = 4770.35 to 4898.95 = 128.60 points (Up)

Wave 5 has to comparable with wave 1 or wave 3.

Consider first with wave 1 – Wave 5 = 2.618* wave 1 = end up 5378. So we can say that 5378 will act as tougher hurdle to cross.

Let us explain with Wave 3 – 4847.70 to 5194.65 = 329 points (Up)

76.40 % rise from 5041.70 of wave 3 = 5288, which was roughly the high point of Friday’s trade.

I like to add one more point. This rally is running from 4770. From a top you need to put support at 38.20% as reversal point. Previously it was coming at 5029, now it is coming at 5090-5100 levels. Now, support if we see a high at 5343 then 38.20% will come @ 5125.

So you should look for 5343 as first hurdle and 5378 as second hurdle. Wave theory suggests that fifth wave advance can continue till 5343 but I am doubtful about 5378. Although I should not close any views completely so I will keep 5496 in my studies.

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Praveen Kumar

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