Nifty: Beginning 25.10.2011

First of all,let me remind you of two most important events due today:

1.RBI policy announcement;

2. October series settlement.

Now please have a look at the EOD chart on the left.

Y.A=4728-5160=432

Y.B (in play currently) can retrace 23.6% to 99.9% of Y.A

Such a huge range for the retracing wave makes the study of its sub-waves necessary.

This Y.B,when it started had the probability of taking any Corrective form--zig-zag,flat,triangle or a combination of these.

As we have been following it consistently,its subwaves:

Y.B(a)=5160-5011=149

Y.B(b)=5011-5148=137(92%) have given a clear indication that Y.B is playing out as a Flat.

And based upon 92% retracement by Y.B(b) of Y.B(a), its very likely that Y.B shall fan out as a Regular Flat wherein Y.B(c)= Y.B(a)=149 so the most likely target for Y.B(c) is 4997.

However, it would be prudent to keep in mind that

Minimum for this Y.B(c) is 0.618*Y.B(a)=0.618*149=92=5054

Maximum for this Y.B(c) is 1.618*Y.B(a)=1.618*149=241=4905

Now lets have a look at Y.B(c) as it has fanned out so far. Please have
a look at the chart on the right.

This Y.B(c) has to be a 5 wave form-sw1 to sw5.

To me it appears sw1=5146-5185=61 has got played yesterday as:

5146-5128=18

5128-5143=15

5143-5090=53

5090-5103=13

5103-5085=18

And sw2=5085-5106* is in play capable of going up to 5145.

Now building upon this probability,wherein sw2 does 5085-5145 we find that sw3,which has to do a minimum 1.62*sw1= 1.62*61=99=5047(5146-99), sw4 cannot go above 5085 and then sw5= min. 0.618*sw1=0.618*61=38=5046(5084-38)

Thus a minimum 5046 level is ensured even for the most conservative Y.B(c),hypothetically built here.

But do keep in mind that maximum of 4905 is also a probability in case of a harsh RBI tone.

And then, as soon as this Y.B(c) ends, we shall embark upon a SHARP UPMOVE as Y.C.

Please ensure that your shorts are not caught on the wrong foot.

Best of luck.

Raghu