Nifty 50 Index – Assessing the Fifth Wave’s Progress

Bearish Reversal ahead in Nifty 50 Index

In our previous article about the Indian Nifty 50 index we expressed an opinion that its uptrend cannot be trusted for much longer. Our skepticism was based on the benchmark’s weekly chart, which revealed a clear impulse pattern. A three-wave correction follows every impulse, so with the price around 13 500, we thought it was time for caution.

Almost seven months later now, the Nifty 50 is trading above 15 800. This continuous surge prompted some of our readers to ask whether the big picture count was still valid. We think it is and to increase the precision of the analysis, we are now going to examine the daily chart below.

Nifty 50 Index Completing Fifth wave

The chart above gives us a closer look at the structure of wave (5). When it is not an ending diagonal, a fifth wave would take the shape of a regular five-wave impulse. In this case, the pattern can be labeled 1-through-5, where two degrees of the trend are visible within wave 3, as well.

If this count is correct, instead of ruining the long-term negative outlook, this chart suggests the anticipated reversal is even closer now. Another reason not to trust the bulls is the bearish RSI divergence between waves 3 and 5. Of course, none of this is a strong enough reason to short the Nifty 50 yet. The trend is still up and attempts to pick the top are never recommended.

Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!

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