09 August 2012: Nifty Elliott wave analysis: Nifty has faced expected resistance at 5378 & and now it is the time for profit taking for expected target at 5278 levels.

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

Today’s outlook: -

First signal for weakness always comes from mid cap and small cap index. If you look at that index then you can find that that has slipped more than blue chip index. We are on resistance of 5378 to 5400. Well, we still have a buy figures by FII, which is 1114 crs for yesterday in cash market.

Market will be waiting for IIP data which is expected to be in the zone of 1% to 0.50 %. Market may face stiff resistance again at higher levels near 5378 and then at 5400. We must note that European market and American market is just near to February month high but Nifty is way behind.

I am expecting a correction to begin for a move towards n-line @ 5278 (of reverse H&S pattern). If it rebound from that point then it will be decisive for a move towards 5526. If it exhibits the weakness below 5278 then it might try to violate the import reverse H&S pattern. Chances are less for that kind of development but I cannot rule out any possibility.

I always criticize government of India for its inactivity. I heard that they are planning to distribute mobile phone to the citizen below poverty line. It will cost more than INR 7000 crs to government. When we are expecting that government should lower down its expenses then this kind of decision is beyond my understanding. How can you people expect that those who can no food to eat will use mobile phone? Every 4^th person is not getting food to eat even twice a day. It was not expected from economist like Dr. Man Mohan Singh.  

Wave development: -

Nifty has a low at 5032 on 27^th July 2012. As of now we can sense that there is a beginning of new wave which probably is going to be a rising wave. Take a note that we have seen a completion of up wave which has started from 4770. It is named as 1-2-3-4-5-a-b-c in above chart. On 3^rd August 2012, we got a low of 5164.65 which is exactly 38.20% against the rise from 5032 to 5246.

This is encouraging with few challenges on higher side. Every wave trend has some relation with its previous wave or waves in terms of ratio. I myself have said that this is going to be most unreliable rise looking the reason of rise but when I have to work with charts then I am forced to keep those away. I can tell you that charts are still saying that I am not wrong in a big way. Magnitude of upcoming wave will be lesser compared to past few waves.

Charts are saying that if we manage to close above 5279 then we can conclude for the formation of ‘reverse head and shoulder’ pattern. It will have n line @ 5279. You can say for the rise which should be equal to 5279 – 5232 = 247 points. It can give me a target of 5526. Well, it is looking easy but it will not be easy. We can say,

Beginning point of wave = 5032.40

Wave 1 = 5246.35

Wave 2 = 0.318 times of wave 1 = 0.318 times of (5246.35-5032.40) = 5164.65

Those who are bullish in their nature should keep their fingers cross for 5279+.