28 August 2012: Nifty Elliott wave analysis: It finally came near to 5340. Break below 5340 will result fall towards 5290 levels. I will not surprise if August month derivative expiry end near 5200.

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

Today’s outlook: -

I have already expressed the importance of 5340 earlier also, hope you remember. We came back to those levels once it broke 5400. It was fully expected move. Technical charts are suggesting that break below 5340 will give us the levels of 5290. One should look at above chart to understand Fibonacci supports.

On higher side, no levels can make this market safer. I am assuming that 5380 and 5400 will act as stiff trading resistances. We need to understand the geo-political situation too apart from technical charts. Many leading global market is trading with almost lowest volume of year 2012.

I have already expressed my concerns over absence of reform. Our market will bound to fall if policy makers fail to give some boost up dose to the economy. It is a national shame to see the way things are developing in parliament. Firstly a bigger scam then demands of resignation and then denial of resignation. Whatever is happening in the ‘name of politics’, those will make much bigger impact to stock market in long run. We are far far away from improvement.

The way coal blocks have allocated, I just remember a phrase when I was in school days, “ram naam ki loot hai, lot sake tou lut”. I feel sorry to that parliament is not doing its work. I am not blaming any single political parties, all are equally responsible. If I am saying this then it means that perhaps we are living on the sharp edge for the “VERTICAL DIP” in Indian economy. I am not more than a drawing room analyst but I have successfully forecasted for the fall in Indian GDP toward 5% long back by January 2012.

Wave development: -

Elliott waves are turning very critical now. You can able to see that now every single wave is contracting in nature. First rising wave started form 4531 has a life for 1100 points, and then next rising wave started from 4770 and has a life for 580 points. Next rising wave started from 5032 and has a life for 418 points only.

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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Praveen Kumar

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