Nifty vindicates our stance since our last update by hitting new highs. The price action immediately after our update (i.e. on July 3) was a breakaway gap which generally points to end of the current trend and beginning of a new trend in the opposite direction. We have marked as breakaway gap in the chart below:
However today’s price action has the potential to have equally strong implication. Today Nifty gapped up and in the process broke away from the trend channel shown above. This gap is potentially a runaway gap which has a strong bullish implication. Not only this, the gap formation is happening as part of wave 3 at various degrees. Such gap formations often lead to strong rallies if the gap isn’t closed. The target for Nifty based on just this price action would be around 10152/ 10234. This is assuming that the gap isn’t closed subsequently. That is Nifty doesn’t go back to the previous day high around 9824.
However even if this gap is closed the markets may still be able to hit these levels, albeit a little later. On the downside 9778/ 9700/ 9639 are important support levels.