Nifty Elliott Wave Update

MARKET UPDATE: 06 OCT 2020

NIFTY
TIME	TREND	UP LEVEL	DOWN LEVEL
Medium term trend	Up	11400-11618	10790

Explanatory Note: Wave 4 done wave 5 started

I have stated that the US and some Asian markets ended 5 waves up and corrected to the 20-week average, a good support. Now, will they start wave 3 up of larger degree or spend many more weeks in a corrective phase is what we do not know for sure. A corrective bounce in the US would be an X wave and a retracement of the recent decline. While that happens India has a chance to complete its own 5 wave advance because Nifty only looks like 3 waves so far. The September correction in Nifty lasted 4 weeks and is wave 4 down. Last week we closed positive and I think that wave 5 up has already started. The 5th wave will usually retest the high of 11794. But normally it should attempt to go toward the upper Bollinger band or upper end of the rising channel near 12182 and 12545. Time-wise from bottom to the top wave 1 was 6 weeks long. Wave 5 is only one week old so if it went on for another 5 weeks we end up at the end of the first week of November. The 20/40 week moving average is close to each other and if markets remain positive we could get a positive crossover. All this as the weekly momentum remains in sell mode, in conflict with the daily momentum that crossed back to the buy-side on Friday. This means that while wave 5 occurs the weekly momentum may develop a negative divergence with price by not making a higher high.

 

Bank nifty too the daily momentum is now in buy mode and weekly still in sell mode. Wave counts are very different because of the recent underperformance of banking. I have marked the fall as wave 2 down. After 4 weeks of week over week declines, we closed positive this week so that might mean that wave 2 ended just above the 61.8% retracement mark. We managed to close above the 20 week average again after breaking it so hopefully that break was a false break down. The level is at 21636, and closing above it we should remain bullish trend. The next hurdle is 23434, the 40-week average which will coincide with 61.8% of the fall as well. A close above it would add a lot of weight to the recovery in a 3rd wave or wave 1 of 3.