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Nifty 50 to Fall Below 10 000 Level Again?

It has been almost five months since our last update on the Indian Nifty 50 index. On September 25th, the benchmark was trading around 11 000, following a pullback from the all-time high of 11 760. Still, the Elliott Wave analysis below suggested it was too early to buy the dip.

nifty 50 Indian stock market index Elliott wave analysis

The daily chart of Nifty 50 revealed a textbook five-wave impulse to the upside from $6826, labeled (1)-(2)-(3)-(4)-(5). The Elliott Wave theory states that a three-wave correction follows every impulse, so it made sense to prepare for a notable (A)-(B)-(C) decline.

The lower line of the trend channel the impulse has been moving within was breached in early October. The price kept falling until it reached 10 004 on October 26th. Three and a half months later, on February 7th 2019, Nifty 50 was hovering above 11 100 again.

Daily Nifty 50 chart Elliott Wave update

The updated chart above reveals the decline from 11 760 so far looks like the first two waves – (A) and (B) – of the anticipated three-wave retracement. If this count is correct, the remaining wave (C) should now drag the index below the 10 000 mark and possibly to the support area near 9000.

Ever since wave (A) breached the line drawn through the lows of wave (2) and (4), Nifty 50 hasn’t been able to return above it. What used to act as support has now been turned into resistance, further strengthening the negative outlook.

Nifty 50 – A Look Into the Details

Now, in order to confirm the bear case, let’s take a closer look at the structure of waves (A) and (B) on the 2-hour chart below.

Hourly Elliott Wave chart of Nifty 50 index

The plunge from 11 760 to 10 004 can easily be seen as a five-wave impulse, labeled 1-2-3-4-5 in wave (A). The five sub-waves of waves 1 and 3 are visible, as well. The recovery to 11 118, on the other hand, is definitely not impulsive.

It appears to be a W-X-Y double zigzag, which completes the 5-3 wave cycle. In addition, the 61.8% Fibonacci level caused a bearish reversal last week, so wave (B) is most likely over already.

Both the daily and the 2-hour charts point in the same direction. Unfortunately for the bulls, the recovery from 10 004 looks more like a chance to evacuate rather than a buying opportunity.

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