The Nifty has continued to drift higher over the past many days. In fact, it has been nearly 26 days since the index has managed to protect the previous lows on a closing basis (excluding outside candles).
This is the typical behaviour of an Expanding Triangle pattern that creates the much-needed euphoria by giving a throw-over above important trendline levels.
To understand the pattern let us look at the Nifty movement on an hourly chart.
Nifty 60 minutes chart:
Elliott Wave analysis
Following is an excerpt from the daily morning research.
As indicated on the previous day, the ongoing up move post wave x can either be a Diametric or an Expanding Triangle pattern as wave e is the biggest so far. Expanding triangles are most common during very large complex corrections.
As shown on the hourly chart, post x wave formed near 12,600 levels, prices are probably in wave e as of now. As per Neo Wave, the e wave will usually be the most time-consuming and complex segment of the expanding triangle.
The most typical construction of the e wave would be a Zigzag (in small expanding triangles) or a complex combination of corrections in larger patterns.
Also, the Elliott Wave forecaster Glenn Neely says the e wave will usually almost break beyond the trend line drawn across the top of wave a and wave c. As shown on the chart prices have now broken above the a-c trendline before reversing on the downside.
However, only when the price breaks the important support levels on the downside, we will be able to conclude that the pattern is over. Until then, existing buyers can keep riding the trend unless there is a close below the prior day's low.
Note that in addition to the above, Channels, RSI and Bollinger Bands are also applied which further helps to add conviction and provide a precise trade setup.
(Ashish Kyal is an author and the founder of AshishKyalTradingGurukul.com/WavesStrategy.com. He can be reached on Twitter at @kyalashish)
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