31 August 2012: Nifty Elliott wave analysis: Market may not able to sustain at higher levels. All eyes are towards GDP data and the outcome of Jackson hole meet. Resistance – 5354 and 5374. New wave of selling will begin very soon.

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

Today’s outlook: -

Yesterday nifty came near to the support of 5240 and low was just 5255 levels. I must say that support acted more on intraday basis. I still feel that more falls has yet to come but there is some interesting development on Elliott wave chart.

Wave ‘a’ has started from 5449 and ended at 5255 (as of yesterday’s low), so the recovery from 5255 to 5343 is giving wave ‘b’ but unfortunately it become intraday and majority of rise came in last 25 minutes of trades. Most of the time this kind of formation results a sharper follow up of main trend. You can observe same from the given charts too.

So now the question is that where will we get that confirmation and what can be the target? Even if it go in the ratio of 1 to 1 compared to wave ‘a’ then also it will try to move towards 5149. On higher side it will have fewer stiff resistances like 5330 < 5353 < 5374. I am sensing that 5353 is a tougher figure and 5374 will remains untested.

Remember, I have already said that rise above 5378 – 5400 will remain ‘unreliable’. One must note that yesterday’s rise was dominated by short covering only. You cannot expect rise in the absence of reforms.

GDP Data – Expect 5.30%. In the worse case it can come as 4.90% also. It is very challenging time for economy. Market may not enjoy for the hope rate cut if data comes poor as RBI has already said that their priority is ‘inflation’. Rest god knows what market wants.

Jackson Hole meeting – Stock market may not be ready to accept what fed used to say in last many meeting. So, time is looking to be over for the ‘words’ of ‘hopes’. I can say that chances are less for QE 3. Even if it comes then also it will be not like the way market is wanting for.

More over, India’s problem seems to be much bigger over coalgate scam. It seems “COAL” becomes a political fuel and it may act in the same way till 2014. I am repeating again that nation is at critical phase and politicians hardly care about it.

Abhijit group – It is a company whose prime product is ‘under garment’. I fail to understand what this company is doing with coal blocks. Few names in coal block scam – TATASTEEL, ESSAR, JINDAL POWER, RPOWER (as updated by media reports).

Wave development: -

On 30 August - Firstly, I have quoted for resistance at 5449-5450. I have already said that this is ‘most unreliable’ rise. You can ask for reason. Just a fair question, what was the base of this rise? Just hope and blind hope. Now we in the final count down of hopes for Indian, European and American market. I have said this in past and repeating again that policy makers are playing with the fire of stock market. They are just buying time from stock market. They will not act on their words.

Earlier in the week - 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.

Earlier in the month - 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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