12 September 2012: Nifty Elliott wave analysis: It is sustaining above 5378 and hence higher targets are applicable. It may try to move towards 5449 if sustain above 5400 levels. As it is dictated by optimism so the out come of those optimism will drive market trend.

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

Today’s outlook: -

The moment Nifty start trading above 5400, it will change the ‘interpretation’ of charts. There are too much news flow and too much optimism. It is difficult to make call with great confidence. Market is waiting for German court verdict over ESM, outcome of FOMC meet with bet on QE 3 and IIP data in India.

Technical analysis is the study to understand mass behaviour but now a day market direction is well governed by few events and fewer big money across the world. Charts are suggesting that cross above 5378 can give rise towards 5400 < 5420 and then 5449 too. It is for sure that it going to be wild two days ahead.

If levels like 5500- 5526has to come then it can come in coming few days only. Although, I need to accept that I was not expecting this kind of higher crossover. I was expecting this market to go back to 5215 levels. I am puzzled with this kind of optimistic rise. This kind of rise can leave one with just one direction and those are direction with liquidity. I must accept that I am not trying to be optimistic as the reason and outcome of that optimism are not good enough to say for a ‘trend’.  

In the absence of policy reforms we are bound to be laggard of global market. Look at some data, Dow Jones is at its February month’s high but we are still 5% down from same period. Still, as long as optimism sustain, this rise will see continuation. One must note that market men were expecting fuel price hike by yesterday evening. It has again failed. Government is trying to make a ‘perfect timing’ and there cannot be any perfect time for such decision.

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+.