17 August 2012: Nifty Elliott wave analysis: Nifty fail to sustain in the zone of 5378 to 5400 levels. It seems that rise may remain tough. One must be cautious at these levels. Trading support at 5340 > 5280 > 5240.

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

Today’s outlook: -

Yesterday was the day when Nifty goes in consolidation with rise in Reliance. We must accept that Nifty fail to impress above 5378 even after crossing. Few days back I said that this rally will find tough resistance in the zone of 5378 to 5400.

I must accept that now it can only extremely strong global cues can push the market higher but we are missing those. We have seen dip in metal stocks yesterday which is indicating that we are little far away from further big rise. Still I cannot conclude that this market is turning weak. For any kind of remarkable dip we need some more confirmations.

Reverse H&S pattern is indicating for higher targets but those are not going to be easy one. We can expect trading resistance at 5390-5400 levels for today’s trading. Break below 5340 can be the first sign of weakness. On daily charts, we will have short term support at 5279 only.

I am repeating again for today also that performing blue-chip will not loose its shine so soon. One should be very careful in stock selection. It seems that we entered in a phase where stock market may refuse to accept positive cues. Be careful from mid cap and small cap stocks.

Wave development: -

I like to add few more things for “reverse H&S”. Length of head = 5279 – 5032 = 247 points. Confirmation point will be one-third of head length i.e. 247/3 = (~) 83. It means 5279 + 83 = 5361. So we need to see the one-third confirmation rule to bet for 5526. As it is visible on daily chart so we need to see this close to close basis. (This is a “must know” concept).

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+.

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