Bank Nifty can Decline Further Towards 22578-22369 – Elliott Wave Analysis

| May 18, 2017 | 0 Comments

Bank Nifty opened lower today and bounced after opening to register high 22834 but didn’t sustain at those levels and decline back to register the low 22660 and finally closed 237 points down at 22698.

Yesterday, a small or big decline was expected and Bank Nifty 18 May 22900 put bought at 70-75 on Tuesday was suggested to hold with stoploss 23047. Today morning also suggested book part profit when Bank Nifty breaks below 22743 and hold rest position with stoploss of 69 (22900 Put premium).

Bank Nifty declined by more than 250 points today and Bank Nifty 18 May 22900 Put bounce above 200 and closed at 198. 18 May 22900 Put gave more than Double Profit. Now, we need to analyze latest charts to calculate further move.

This report is covering Bank Nifty move after 9 Feb 2017 low 20003 and earlier wave and is further update on my last analysis report Elliott Wave Analysis of Bank Nifty on all time Frames Dated 03 April 2017

Elliott wave counts of Bank Nifty on 5 hour chart

Elliott wave counts of Bank Nifty on 5 hour chart

This is 5 hourly chart of Bank Nifty showing bounce from 20003 which is start of wave (V) on previous chart.

It seems an impulse is completed from 20003-22978 as shown on chart. Inner wave (3) of this impulse is tricky and slower and wave (5) is faster and highly extended which projected more than 61%. These are the most probable count at this point of time.

23%-38% retracement of this whole wave (from 20003-22978) is at 22275-21840 which is the expected targets range on downside if impulse is already completed at 22978 and correction is already started.

Now we need to analyze the progress of wave (5) started from 21386 on separate 30 Min chart to check the pattern.

Elliott wave counts of Bank Nifty on 30 minute chart

Elliott wave counts of Bank Nifty on 30 minute chart

This is 30 Min chart of Bank Nifty showing bounce from 21 Apr 2107 low 21386 which is the start of wave (5) shown on previous chart.

Wave 3 seems completed at 22491, wave 4 may be completed at 22241 and wave 5 may be completed at 22978 as shown on chart.

Inner wave (iv) of (5) from 22834-22578 was Irregular Correction which confused us for 2-3 days and our stoploss was triggered and inner wave (v) of (5) is also extended. Extended wave (v) of (5) is started from 22578, So Bank Nifty can give sharp decline towards 22578.

Otherwise, 23%-38% retracement of this whole wave (5) (from 21386-22978) is at 22602-22369 which is the expected targets range on downside if the correction started. Bank Nifty achieved 22660 till now.

Now, let’s have a look at pattern of decline from all time high 22978 to calculate very short term move.

Elliott wave counts of Bank Nifty on 5 minute chart

Elliott wave counts of Bank Nifty on 5 minute chart

This is 5 Min chart of Bank Nifty covering move from all time high 22978.

The decline from high 22978 seems impulsive with inner wave (3) already completed at 22710, wave (4) completed from 22710-22813 which retraced almost 38% and wave (5) may be in progress.

38%-61% projection for wave (5) is placed at 22710-22647 where 22710 is already achieved and wave (5) seems within its inner wave (iii) or (iv).

This impulsive decline started from 22978 can be wave (A or 1) and we can expect wave (B or 2) to form after completion of (A or 1) at lower levels.

Normal 38%-61% retracement for wave (B or 2) is at 22781-22856. End of wave (B or 2) is the point from where Bank Nifty can give a sharp decline of about 300 points again as wave (C or 3).

Wave (A or 1) is already in last wave, so very near to completion. So, we need to wait for formation of wave (B or 2) to initiate next positional trade.

Conclusion and Outlook: 

Bank Nifty gave a sharp decline of about 300 points from high today as I was expecting from last 3 days, though formation of Irregular Correction in between confused us for a while. We also caught this decline perfectly and booked 75-125 points profit in 18 may 22900 put taken on Tuesday at 70-75 (more than double profit).

Now, 22602-22369 is next immediate target range for downside if I am right at identifying the pattern and Bank Nifty have possibility to decline sharply till 22578 at least because extended wave (v) of (5) started from 22578.

Wave (A or 1) is near to completion, so we need to wait for wave (B or 2) to form in between 38%-61% retracement of wave (A or 1) to initiate next positional trade for fast and sharp wave (C or 3). 38%-61% retracement of wave (A or 1) progressed till now is at 22781-22856.

For Trading,

Wave (A or 1) is already in wave (5) so there is no further scope in initiating fresh short. And next wave (B or 2) is most confusing wave because we don’t know how much time it will take or which pattern it will form. So, any fresh trade is difficult to decide at this point of time.

So, we need to wait for the formation of inner waves of (B or 2) to trade on upside. Or we need to wait for completion of wave (B or 2) to trade positional for good decline expecting wave (C or 3). So, I will suggest best and low risk high reward trade once any of the patterns is formed.

In overall scenario, Bank Nifty can complete wave (A or 1) at bit lower levels, followed by bounce of 38%-61% to form wave (B or 2), followed by decline of about 300-450 points to complete wave (C or 3). Experienced traders can use this general outlook for trading according to their own system and trading style.

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