Trading Nifty on 31-07-2012

To repeat:

 (i)=5348-5218=130

(ii)=5218-5267=49

(iii)=5267-5033=234[180% of (i)]

(iv) 5033-5206*=173

a=5033-5150=117

b=5150-5078=72

5149.95-5093.3=56.65

5093.3-5113.65=20.35

5113.65-5077.65=36

c=5078-5206*=128

And this has so far been on expected lines.

However the channel for (iv) has not been tested as it should have done for an ideal zig-zag abc.

Also no negative divergence so far has been noticed(although when I look at the previous two tops,no negative divergences are noticed there as well).

Territory of (i) starts at 5217.8 and (iv) is not supposed to enter (i) so I initiated shorts at EOD with Stop-loss at 5218 and target below 5033 to complete an ideal 5 wave Impulse to the down.

And what if 5218 is breached?

That I would mention in the morning---of course before market hours--

On 5218 getting breached following probability would be preferred by me:

sw1=5033-5150=117

sw2=5150-5078=72

sw3=5078--5220(imagining 5218 gets breached).

This sw3 is likely to go upto 1.6xsw1=187=5265 and over all labels would be 

A=5348-5033=315

B(in play)=5033-5265*(expected)

C to start =A= 5265-315=4950

Accordingly the shorts should keep stop loss at 5268.

9.22 AM

Although we have come below 5205 now but the opening minutes have changed the labels----as we have breached 5218.

All rises have to be shorted --shorts closer to 5267 would be the best---with Stop-loss at 5268 and target below 5000.

9.35 AM

A few of my friends have been suggesting,particularly in view of the TL break that I should consider an immediate bottom formed at 5033 in following manner:

And they say that it is in sync with my overall labels of upmove from 4770 being a C wave with 3x3x3x3x3 form in following manner:

C1=4770-5348(3 wave)

C2=5348-5033(3 wave) and 55% retraced

C3 in play and would test 5600

Although market is supreme and a positive surprise from RBI can see markets rushing up but going by my understanding of EW this probability is not my preferred one at present.

In fact I am waiting for the Hourly close at 10.00AM to see if it closes above 5222(Hourly closing low of (i)=5348-5217.8.) 

11.45 AM

Being the conservative that I am,I am considering the labels as I was doing till today morning:

To repeat:

 (i)=5348-5218=130

(ii)=5218-5267=49

(iii)=5267-5033=234[180% of (i)]

(iv) 5033-5218

(v)5218---downwards--- minimum 0.62x(i)=81=5137

Below 5137 I would look for weakening momentum to close my shorts and go long again.

Stop loss for shorts at 5207 now

(v) not going below (iii)--a probable truncation---usually does not take place in A wave.
And also a truncation usually takes place only if (iii) is super extended which is not the present case.
So logically we should go below 5033


2.12 PM
Tough day---SL gets triggered. Better to sit aside and wait for EOD

2.40 PM
Still waiting for Hourly close above 5222 to officially invalidate the count.


EOD: Finally closed above 5222 to confirm the invalidation of labels.
Not a good day.
For two reasons:
1. Doubts crept in mind as it breached 5218 in opening minutes and then went down -- such close shaves are not frequent but I was happy to see the red, particularly when after RBI policy the red persisted.
And the 11.45 chart posted( just notice the channel support and upmove after that)-- 
2.Seeing profitable positions not getting converted into real time gains is painful--and this is what happened today.


Let me get back to the pattern chart posted two day ago--

 Now this pattern has to be seen as below:

Courtsey Piyush Sharda we have a better explanation for A as a 5 wave form:

The 5 subwaves of A:

(i)=5348-5218=130

(ii)=5218-5267=49
(iii)=5267-5076=191 has very clear fractals:
5267-5169=98
5169-5257=88
5257-5108=149
5108-5144=36
5144-5076=68
(iv)=5076-5126=50
(v)=5126-5033=93

Thus we have
A=5348-5033=315
B=5033-5234* in play can at the most do 80% of A=252=5285
B(a) looks like over today at 5234 as a 5 wave form=5033-5234=201
5033-5150=117
5150-5078=72
5078-5218=140
5218-5154=64
5154-5234=80
Thus the 3rd subwave is 175 % of 5th subwave and Ist subwave is 146% of 5th subwave.
B(b)=5034 downwards should start now to retrace 50-62% of B(a)=5135-5100 band.
B(c) would then come up again.


My above labels are guided by the negative divergence in Hour charts which are in overbought zone.
And to keep these labels valid the current upmove should not go above 5241 as that would not keep the 3rd subwave of B(a) as extended 
Raghu