Nifty has broadly performed in line with our expectations outlined before the election results were announced. The 11900-12500 zone mentioned in our last post has been a strong resistance zone. Based on the price action since, we believe it is very likely that this zone will continue to remain a strong resistance zone for at least the next few months. Below is the chart depicting the elliott wave count on Nifty:
Based on this we think currently Nifty may be tracing a wave 4 triangle. This triangle should ideally manage to stay above the 38.2% retracement level around 11425. Currently we may have already seen 3 legs of the triangle (A-B-C) traced out. On completion of waves D & E we may expect a thrust out of the triangle to the upside. This thrust if it occurs may be capped at the upper end of the 11900-12500 range, and we may see a bigger correction in Nifty once this upmove is complete.
Conclusion: Nifty may currently be tracing a triangle, which we expect to resolve to the upside after completion of waves D & E of the triangle. The upside thrust after triangle completion may see Nifty extend the rally to around 12400-12500 level, which may prove to be a very strong resistance. If this move materializes we may expect a major correction to develop after the up move.
