Bank Nifty seems to be consolidating in a wave 4 triangle
Bank Nifty Future seems to be consolidating in wave 4 of a triangle after the high of 39794 made on August 19. It looks like wave (A) have completed at 37991 on August 23 and wave (B) has either completed at 39490 on August 25 or is still in progress. 39400 is 78.6% retracement of fall from the high so that should be a good area for wave (B) to end. Once wave (B) completes, we would see a wave (C), (D) and (E) before the market move to break above 39800.
There are 3 main reasons why the current wave looks like a triangle
1. The fall from 39794 is a 3 wave and contained well in a parallel channel.
2. The rise from 37991 is also a 3 wave and contained well in a parallel channel.
3. The kind of volatility we are seeing is typical in a triangle.
The view will be invalidated if it goes above 39794 or goes below 37991.
If the market keeps moving both sides that will further strengthen the case for a triangular formation.
The first alternate count is that current rally is corrective ABC where wave (B) is completed and market is ripe for fall below 38000 in wave (C). The second alternative count, least probable, would be that current rally is impulsive and market has completed wave (1) and we are in wave (2), once it is complete we would break 39794.
Probably, this could be a good time for an option seller to sell far strike prices and sit tight.
There are 3 main reasons why the current wave looks like a triangle
1. The fall from 39794 is a 3 wave and contained well in a parallel channel.
2. The rise from 37991 is also a 3 wave and contained well in a parallel channel.
3. The kind of volatility we are seeing is typical in a triangle.
The view will be invalidated if it goes above 39794 or goes below 37991.
If the market keeps moving both sides that will further strengthen the case for a triangular formation.
The first alternate count is that current rally is corrective ABC where wave (B) is completed and market is ripe for fall below 38000 in wave (C). The second alternative count, least probable, would be that current rally is impulsive and market has completed wave (1) and we are in wave (2), once it is complete we would break 39794.
Probably, this could be a good time for an option seller to sell far strike prices and sit tight.