Ashish Kyal is Founder of WavesStrategy.com and Ashish Kyal Trading Gurukul
Nifty Volume Profile with Elliott Wave For Accurate Forecasting!
The Nifty has continued to be 'Sell On Rise' that we have been mentioning over past many weeks. It has paid out well, especially if you know how to Trade Options using volume profile and Elliott wave.
A research shows Elliott wave pattern along with strong resistance where volume activity has taken place. The volume profile shows behind-the-scenes action when majority are focussed on price action or just volume and not the profile that represents at which price point major action is takes place.
Nifty Hourly chart Elliott wave with volume profile
Elliott wave for Options Trading
By looking at the chart we can clearly see three important levels: (1) 17,860 – this is the Point of Control (POC) where highest activity has taken place which looks like distribution by big players, (2) next resistance level is at 17,400 (futures) which is next highest volume node, and (3) the minor support is at 16,660 (futures) level. Given this information, an Options trader will understand the areas that are difficult for prices to breach as lot of volumes have taken place at those levels.
Elliott wave – As per the wave pattern, prices are either forming a diametric correction or a triangle pattern. Wave e is ongoing which is just moving below the value area low levels. A sustainable close below 17,000 will extend this wave further on the downside for a move towards 16,660. For a positive trend to emerge, the Nifty has to now break above 17,400 levels as per the volume profile area.
The research clearly shows that by combining this simple method of volume profile along with Elliott wave, one can form prudent options trading strategy, possibly of selling Call options of 17,400 and 17,900 strike prices and trade with an edge.
In a nutshell, expect the Nifty to be moving in a broad range with 17,400 - 16,950 and breach below 16,950 can open downside levels for 16,660 levels.
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