In our last article about the Indian Nifty 50 index, published on May 19th, 2017, we shared an opinion that the price “is probably going to reach the 10 000 mark from now on. Maybe even 10 500.” Eleven months later, the Nifty 50 is trading near 10 550 after reaching 11 171 in late-January, 2018. Given that most other major indices are at record highs, should we expect a new all-time high from India’s benchmark or more weakness going forward? The chart below helps us put recent developments into Elliott Wave perspective.
The daily chart focuses on the price surge from 6826 in February 2016. As visible, it cannot be seen as a five-wave impulse pattern yet, but there are two reasons to believe the bulls are going to climb to 11 200 soon. First, the price action has been developing between the parallel lines of a channel, whose lower line managed to discourage the bears near 9950. Second, wave (3) is slightly shorter than the perfect 161.8% Fibonacci ratio between third and first waves of an impulse, which allows us to assume the recent decline from 11 171 to 9952 is wave (4). In addition, the lower line of the price channel coincided with the 38.2% Fibonacci level, forming a cluster support near 9950.
According to this analysis, the Nifty 50 index is still in an uptrend. A new all-time high above 11 200 could soon be expected in wave (5). However, instead of buying the bullish breakout, investors should do themselves a favor and stay aside, because the theory states that every impulse is followed by a three-wave correction in the opposite direction. The bears should unleash a notable decline to at least 9500 once the bulls run out of steam in the area between 11 200 and 12 000.