Wednesday, May 7, 2008
Nifty Shorter Term Outlook - May 8th 2008
Okay here is my nifty shorter term outlook...Nifty hourly charts...If you see above chart, I have marked the waves from the lows...Elliot wave says that every bullish or impulsive wave consists of 5 waves...3 UP and 2 DOWN...In the same way, every corrective wave will have 3 waves...Of this 2 down and 1 up in between....A corrective wave 'corrects' the impulsive wave. Generally fibonacci retracement techniques allow us to measure how much a bullish wave is retraced by a corrective wave...50%, 61.8% etc are normal levels to retrace....So is 38.2%.
So coming to above chart, I saw certain bullish signals at the wave 1 beginning and so went long....Also got out at almost 5250 levels....Now you might ask why?...simply because 3 waves completed and I do not at this point know whether we have a bullish wave which will have 5 waves or a bearish wave having 3 waves....
So scenario 1 - I kinda favour this one - This I have marked above....That is after this correction which should be close to over, we should shoot up higher for one last time...Targets for this final 5 wave will be 5500/5600 area max and a min of 5350/5400. But for this to happen, 5000/4950 area should HOLD. If this fails, the higher targets go down the drain in the short term and we will fall....So ultimate stop of longs here will have to be 4950. Break this and we are going down big time.
Scenario 2 - That this is just a 3 wave move...This means we will break 4950 and go down very quick....Maybe to test lows at 4400 and lower...This is obviously the more bearish scenario...
So its clear...If you're long, keep strict stops. 4930 to avoid whipsaws.
If short, well its up to you...As you know I am short from 5250 area...I am looking to cover today and possibly flip a little long...Very small positions only for the higher targets I mentioned before...Ofcourse as I mentioned in earlier posts, I will be hedging my futures positions since this is a high risk trade....Will enter today and update when I exit.
Will watch stochastics and macd to confirm my thoughts and also look at the daily timeframes to get more ideas.
For today 5100 looks like key...If it manages to hold this throughout the day, it will be very bullish...If not, it will open up 5050 and 5000/4950 areas. Let us see.
Also - watch the beauty of simple trendlines in the above chart...aint it a beauty...! Often its the most simple things that work the best. Study the chart more and you can see how wave 1 shows 5 waves and wave 2 marked shows 3 waves - meaning corrective...And so on...
I will post the longer term setups and charts later.