Nifty

Summary

Published 17th May 2018 & validated 13th August 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 13th August 2018

The Nifty hit a cluster of resistance and got rejected. Moreover, price action carried the Indian blue-chip index outside of the orange trend channel. We remain with our forecast that this action is part of a fourth wave unfolding. The fourth wave may extend for another few days. However, the key takeaway remains that the correction is likely to resolve to the upside eventually.

Published 8th August 2018 (no update on the 9th)

The Nifty has been pushing further to the upside along the orange trend channel. We record first signs of divergence. Moreover, market participants are getting increasingly complacent. An intersection of the orange and pale green trend path has been reached. That action occurred right at beginning of the 11,500-11,700 resistance cluster. Our regular readers know that we have been quoting that area since spring of 2018.

The Indian blue-chip index has most likely more work on the upside left. However, a fourth wave of subminuette degree is likely to kick in soon. We would not be surprised if price action departs briefly below the orange trend channel. 

Published 2nd August 2018 amended 6th August 2018 (chart only)

Our assessment of the Indian equity index, which we have discussed here during the past few weeks gets confirmed. The Nifty 50 worked it’s way up inside the orange trend channel.

We expect the Nifty to progress further to the upside. Moreover, the third wave of minuette degree is probably still incomplete and developing further. The orange trend channel should more or less hold and carry prices to the upper bound of the pale green trend channel. Some resistance is likely to be encountered inside the horizontal blue area, which spans from 11,500-11,700 points.

Last but not least, we should be aware that risk increases along price levels at the current stage. The Nifty 50 is approaching a junction where multiple time frame trends come to an end. This could be sooner or later depending on potential extensions within the current wave structure. The key takeaway here is that the next all-time high could already trigger a significant reversal. This is a lower odds scenario but it is nevertheless possible. The most likely scenario is what we have depicted on our charts in black. All in all, we remain cautiously bullish on the Nifty 50.

Short-Term Elliott Wave Analysis

Published 21st 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). A subsequent drop below 10,600 points leaves only two possible scenarios short-term. Either the green trend channel is a double zig-zag or an impulse with a subsequent irregular flat correction into minuette wave (ii).

We see slightly higher odds for a sideways double-three correction since the late January 2018 peak. We expect a sideways pattern due to alternation guidelines. This could be done by a flat pattern that ends the fourth wave. It is depicted in the red scenario.

The alternative scenario 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. 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