But this can not go on for ever and the equilateral triangle which is getting formed can break on either side. As per Elliot wave principles triangles are generally formed in wave 4 or in an ABC consolidation after a 5 wave structure. If the triangle we are seeing is in wave 4, then we should see a breakout which should take it above 2500, most probably 2600. If this is an ABC consolidation then things become complex, the break can be on either side and starting a new 5 wave structure. The targets cannot be calculated as calculations are based on the length of wave 1.
In any case, what we can say with confidence is that once the triangle is broken (in any direction) with confirmation of high volumes, we will see strong movement in that direction. As the width of the triangle is around 600 we can roughly calculate the breakout target as 2600 and breakdown target as 1400.
It would be interesting to see where the Nifty and Sensex go if Reliance moves to 1400 or more possibly 2600. In my opinion a 1400 Reliance means the markets have cracked and we are staring at 3500 Nifty, a 2600 Reliance would mean that we are making new highs and 5400 would be the likely valuation.
2 comments:
Based on Fundamental Factors and Valuation I would assign a higher probability to a breakdown on the lower side.However, in a liquidity driven market, anything is possible.So maybe we can wait for the breakout trend to emerge before taking any positions...
the effort of identifying a triangle is only worth when you wait for a convincing break of it and then trade in that direction. for sure no point in taking a call right now. we never know what can happen in future.
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