Published 17th May 2018

Odds favor another all-time high. The target depends on the exact correction pattern that leads into the final swing before Indian stocks enter into a cyclical correction. It will most likely exceed 11,500 points.

Market Pulse

Published 17th May 2018

The latest advance after touching the green trend channel support shows a 3-wave move in the same direction as the paramount trend (highlighted in pink). This observation opens the door for many possible patterns. Many will be eliminated as soon as the blue dotted line is crossed around 10,600 points. Nevertheless, we will view the trend as up as long as this mark is not violated. This means that we remain with our black and red scenarios above 10,600 points. However, a very important aspect is to stay ahead of developments and anticipate what could be next.

Crossing below 10,600 points hints strongly that the advance within the green trend channel is a double zig-zag. Elliott’s rules allow one complex wave within a triangle only. We saw that from February to April already. Hence, crossing below the dotted blue line to the downside probably means that we are dealing with a double-three correction since the late January 2018 peak. In plain words, it means that the second part of a selloff that has a similar magnitude of the Q1 selloff is about to hit within this scenario.

The other alternative post crossing the blue dotted line is that the green channel remains an impulse. It just gets corrected by an irregular flat with an unusually big b-wave. Such big b-waves are usually followed by sharp c-waves. That would most likely take the Nifty into the 10,4xx area.

All in all, we remain optimistic to see another all-time high. Crossing 10,600 points probably implies a bumpy road to that destination.

Short-Term Elliott Wave Analysis

Published 14th May 2018

The Nifty Elliott wave structure counts best as an impulse to the upside from the March 2018 bottom to May 2nd. The subsequent wave action may show a sharp and simple correction, which formed the lower bound of the green trend channel. The upside bounce thereafter does not look complete at this moment. Some continuation to the upside is likely. However, any form of upside continuation should remain roughly within the green upside trend.

A break below the green trend probably means that the Nifty 50 is doing a sideways correction of the swing up from March of this year. A break below 10,700 points adds evidence to that whereas a break below 10,600 brings certainty that the correction of that upswing was not complete. In that case, we would expect the Nifty to target the 10,450-10,500 points band before the selloff potentially fades.

All in all, we remain bullish on Indian equities despite further short-term correction potential. The entire minute wave iv(circle) correction may be finished already. The best alternative interpretation remains a sideways correction of minute wave iii(circle). Our usual suspect for that is a triangle. It alternates to the steep and simple character of minute wave ii(circle).

The upside target for the year 2018 remains at least within the 11,500-11,700 points band.

Medium Term Elliott Wave Analysis

Published 17th January 2018 & amended mid-April (charts only)

The BRIC story seems to be confirmed from our Nifty technical analysis point of view. The Nifty 50 swiftly made up for its losses during the worldwide financial crisis in 2008. We label this action as minor wave 1, which ended in 2010.

Thereafter the Nifty Elliott wave pattern shows a flatter rise in minor waves 3 and 5. The flatter rise does also translate into less progress within waves 3 and 5. Waves 1 is longer than wave 3. Therefore our expectations are smaller gains within minor wave 5 than within minor wave 3. Last but not least, it is noteworthy that momentum has been decreasing over the past couple of years relative to wave 3. This indeed suggests that we are currently in the fifth wave of minor degree.

The best alternative to the scenario above is a situation that puts the Nifty in the third wave of intermediate degree. This is still possible but we need to see the trend channels taken out on increasing momentum.

Technical Analysis