Ashish Kyal, CMT
The Bank Nifty had been exhibiting classical higher highs and higher lows, which is a clear Dow Theory method. The index has continued to inch higher in classical diametric pattern as per the Neo Wave-advanced Elliott Wave.
The Neo Wave helps you to understand the maturity of trend and the probable reversal areas. However, we need to get two-stage confirmations that indicate that the trend has reversed.
Let me explain this basic concept of the Neo Wave.
One needs to see a number of days or hours that the last rising segment has taken. A faster retracement below the trendline that connects the important lows provides the first negative confirmation that the trend is in danger.
Later, a complete retracement below the last rising segment provides second stage confirmation that the trend has reversed and a move towards the opposite side has started.
This is an amazing way for confirming that the trend has reversed, thereby providing a good risk-to-reward ratio, and is entering opportunity. Now look at the below chart of the Bank Nifty:
Elliott Wave analysis
The Bank Nifty has continued to move up, making very clear higher highs and higher lows pattern seen after a long time. There has been a systematic rise and rotational participation from different banking stocks.
As long as the short-term chart shows this formation, it is best to stay on the long side.
On the hourly chart, we see that wave G is unfolding in the diametric pattern in wave c (blue). Prices are now a kissing distance away from the previous top and we are keeping a close watch if there is an acceptance or rejection near this zone.
As you can see that the Bank Nifty flirted around 30,800 but closed near 30,650. There has been a rejection near the previous pivot top and we are in wave G, which is normally the last rising segment of the diametric.
It is time to be alert and not complacent to see if prices get rejected strongly and move below the end of wave F in a faster time, which is also the channel support or starts showing momentum above the prior pivot high that will continue the trend towards the channel resistance.
The author is Founder & CEO at Waves Strategy Advisors
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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