Summary:
The upside looks limited for Nifty. It is possible that we
are in the beginning phase of a multi-month corrective phase with the possible
target around 9100 in 2019.
Limited
upside:
On 10th July, when Nifty was trading at 10947, the
following chart was posted –
It showed similarity in magnitude between the two major
rallies that had taken place in 2009-2010 (3800 points) and 2013-2015 (4000
points). The two rallies were
interrupted by a 33-month corrective phase (2010-2013) and a similar corrective
phase of 22 months followed the second rally (2015-16). In the first
corrective, the distance from the 2010 top to the 2013 bottom was 1219 points,
which was almost exactly the same with the distance of the 2015 top to the 2016
bottom at 1225 points.
It must be noted that both the corrections were Neowave
Triangles, first one a Neutral Triangle and the second one Extracting Triangle.
This similarity in rises and corrections persuaded us to
project the pattern in future and gave us targets of 11694 and 11894. In the
last week of Aug’19, the first target of 11694 was achieved and Nifty made a
high of 11760 before turning back.
Now what?
Whenever the minimum target is met, the chances of a
correction increases and the probabilities of further upside get shaved. Nifty
has already met the first target of 11694 and the next target of 11894 is only 134
points away from the high of 11760. Clearly, the upside is limited.
Downside
possibilities:
Now let’s check the same chart, updated with some
modifications –
Some of the Elliott Wave analysts could mark these 3 near
equal rallies as completion of a 5-wave impulsive move (Where 1=5) or a Triple
Corrective but whatever the count is, the implication is the same – a major
corrective phase.
Also evident from the chart above, all the price action
since the 2009 bottom till now is contained in the Red channel and the
latest rejection has taken place exactly at the upper boundary of the channel,
implying a possibility of testing the lower boundary in the coming months.
A major confirmation of the long term bearish scenario
may emerge on the break of the lower boundary of the Green channel, which
stands around 10800 for the current month of September but rises to 10900 by
October.
Significance
of 11760:
Another chart shows the importance of 11760 as a major
level. Check here –
All EW and Fibonacci analysts are acquainted with the
External Projection, which is used when the market is in an expansionary mode.
Here, the magnitude of the 2003-2008 bull market has been projected upwards
from the 2008/2010 top which gives us the target of 11760, increasing the
significance of the level.
Possible
depth of the correction:
As seen from the second chart, in the coming months, Nifty
may target the lower boundary of the red channel and find strong support there.
By Jan-Feb’19, the channel will rise to 9000 levels and with each passing
month, it will get higher.
For another perspective, we may consider this simple chart –
The difference between the 2008 and 2011 lows comes at 2278
points, which is remarkably similar to the difference of 2295 points between
the 2011 and 2016 lows. Projecting 2280-95 points from the last major low of
6826 gives us the possible target of 9120 in 2019, which coincides with the
lower boundary of the Red channel discussed above.
Conclusion:
It may be too early to be this much bearish as the global
markets stand firm till now, but the technicals definitely suggest extreme
caution for the next few months. As long as Nifty trades below 11900, the
bearish scenario survives. A break below 10800-900, if comes, will be a major
boost for the bears.
