Nifty seems to form a 5-3-5 irregular wedge. Sorry for the cluttered chart, but the white waves are corrective and the yellow ones impulsive. We seem to be in wave 4 of the last corrective wave with 18000-18200 levels on cards before we fall further downside. SGX too, interestingly seems to be on a similar trajectory.
Another interesting aspect is that the year has seen nifty form a downward wedge pattern. A wedge pattern in many cases is a trend pause, but the breakout side is crucial. Now, over the past few weeks, another mini downward wedge seems to be forming. After the current bull run, if the wedge trend line is respected, we could see a fall to 16400-16800 levels.
A break upside in the next few days would mean a breakout, but it could be unlikely considering the impending rate hikes due.
With global rate hikes, inflation and a possible recession, the downward movement seems likely.
Three possible routes for nifty could be a breakout now which could lead it upto 20000-21000 which is unlikely.
If not, it could test the 16400-800 area of the mini wedge formed and then do a bull run depending on how inflation and rate hikes easen on account of macroeconomic policies.
If that is broken, then the downside of the bigger wedge could be 13300-14500. This would mean a crash. In 2008 and during covid, nifty corrected more than 50 percent. So, ideally, this correction isn't even that huge if it comes.
All of this depends on global economic conditions over the next year.
I could be wrong in all my views and we could see nifty behave in a totally different way, but this is my view.
Traders can mark the upside of the wedge and wait to see if it is respected and we fall back down or if we breakout to go for their own setups.
Another interesting aspect is that the year has seen nifty form a downward wedge pattern. A wedge pattern in many cases is a trend pause, but the breakout side is crucial. Now, over the past few weeks, another mini downward wedge seems to be forming. After the current bull run, if the wedge trend line is respected, we could see a fall to 16400-16800 levels.
A break upside in the next few days would mean a breakout, but it could be unlikely considering the impending rate hikes due.
With global rate hikes, inflation and a possible recession, the downward movement seems likely.
Three possible routes for nifty could be a breakout now which could lead it upto 20000-21000 which is unlikely.
If not, it could test the 16400-800 area of the mini wedge formed and then do a bull run depending on how inflation and rate hikes easen on account of macroeconomic policies.
If that is broken, then the downside of the bigger wedge could be 13300-14500. This would mean a crash. In 2008 and during covid, nifty corrected more than 50 percent. So, ideally, this correction isn't even that huge if it comes.
All of this depends on global economic conditions over the next year.
I could be wrong in all my views and we could see nifty behave in a totally different way, but this is my view.
Traders can mark the upside of the wedge and wait to see if it is respected and we fall back down or if we breakout to go for their own setups.