As the euphoria about the reforms unleashing on the one side
and anxiety about the stability of the government after TMC pulled out support lingering on the other side the markets are flush with liquidity
injected due the QE3 by the US federal reserve and making higher highs and
higher lows showing the sign of the bullishness. Is it really a bullish
sentiment playing out the mood or is it something else lets take stock of it as
below.
As you can see from the below diagram the markets have been
drawing down from the top it made on Nov 2010 in a ZigZag fashion making Wave
(A), Wave (B) and Wave (C). Now after it made bottom with Wave (C) it has
pulled back from there to make a high of 5630 and from there started correcting
again upto 4770.
Now the question here is that,
Is the move from bottom of Wave
(C) upto 5630 is Wave 1 and following correction upto 4770 is Wave 2 and now the
current upside which is nothing but a leading diagonal formation (as shown in
the fig) could be a first subwave of the Larger Wave 3?
Or
Is it a upward correction of move from Nov top to upto 4531
in which the up move from 4531 to upto 5630 could be a Wave A and the following
correction upto 4770 could be Wave B and then now the upward move which is a
diagonal can be a ending diagonal of Wave C?
As traders what we
have to look at it as in any case the diagonal movement either its sub wave 1 of
Larger Wave 3 or the Wave C of upward correction, is near its ending as per Elliott
wave rules. The maximum upside can be expected upto 5800 before the correction
is expeted to levels near to 5450-5420
Another interesting
fact is that if any day the nifty closes above 5630, it can move upto 6060 in
the short to medium term. But this move can come only after the correction that
we have predicted in the previous Para.
So if nifty closes above 5630 any day then the
market for short term becomes buy on dips for an upside up to 6060. Or if it doesn’t close above 5630
and corrects from there we have to wait for the 5450-5420 levels to break down
to go short in the nifty.
In Both of the above scenarios traders have to wait with patience to get the correct entry either on the long side or the short side.
