Nifty : Options Galore

Now that our preferred wave count has been violated, as the current up-move has gone past 5690, the possibility of this being a wave 4 no longer exists. So how do we adjust to the new possibilities that has open up.

When a downswing ends in 3 waves, the most obvious (and most bullish) next phase that comes in mind is a 5 wave up impulse. Though I cannot totally rule out a 5 wave impulsive move up from 5180, the possibility of it is very low. The reason being the movement looks very corrective in nature. (Details later)

The next probability what we can think of is, that the current leg up is wave 2 of 3, that is wave 3 is sub dividing here and if correct it would be the most bearish count one can think of.

The other possibility can be, that the current wave is a corrective wave in an overall corrective pattern. Mostly wave B of ABC (A in 3 waves, B in 3 waves and C in 5 waves) or wave X of a double zig zag (ABC-X-ABC).

So we see that, there are numerous routes that Nifty can take from here, once the simplest count got violated. We need to see more aspects (Volume, MACD etc) to triangulate the next most likely path.

Just something to ponder over:

Max Pain : March Series

Options Data as on Friday End is suggesting an expiry between 5550-5600.

Nifty : Breakout or Bull Trap?

Nifty has broke out of 5600 resistance on Friday and closed at 5654 with high of 5667. Volume was not convincing and it looked more of short covering than long formation. Rallies generally start with short covering, so that is acceptable. So should we take the rally as a break out? As you can see on the chart below, the 5600 horizontal line was taken out yesterday. If you see the intra day chart (not shown) you will see how once 5600 got broken there was a straight line of buying, which shows 5600 was a tough challenge and in the minds of many players.

What is also interesting to see is that, though the Nifty has cleared 5600, there are other tougher challenges.
First that I want to point is the channel's upper trendline, which it touched on Friday.
200DMA is at 5688 just 30 odd point higher from yesterday's closing.
I have shown Keltner Channel (green line band), for which the upper band is at 5675.
Apart from that Nifty had taken support at 5690, while correcting, so that can act as resistance.

So we see that things will not be easy for Nifty going forward, unless this is a genuine breakout and higher volumes are seen in coming days. If this is not a break out but rather is a bull trap, then we can see Nifty falling below 5600 very soon. Chances of a trend emerging is very high from now onwards. Either we are going to see upper resistances cleared and a strong rally to 5800-6000 or a rapid fall back to 5350-5400. The next week being expiry will make things even more volatile and looks like there is going to be blood on the street, either of bulls or bears.

VIX : "Vapour UP"