| So the answer seems to be
in Elliot Wave Theory. It looks as simple as our stock
market; simple waves of rise and fall. But in fact, it is
as complicated as stock market; ever changing, ever
alluring and requiring modifications at every step in
marking of the Waves. To observe its practical
implementation, the stock market's southward journey was
halted on 29th November, 1998 when Nifty formed a bottom
of 800.10 points. It was a fall of 447.05 points from
1247.15, the top make by Nifty on 22nd April, 1998. Since then the market has been on
the rising trend and on 3rd March, 1999, Nifty touched
1099.80. After that day, is has been making small waves
of rise and fall thus creating confusion in the minds.
The most important question is that is the party over or
is the market taking only a healthy correction? Let us
examine it under the rules of Elliot Wave Theory.
This rise as per Elliot
has been in three waves. The first wave of rise was
completed at 1016.30 having length of 216.20 points. From
here, the market went for correction which terminated at
907.45 points. This was IInd wave having length of 108.85
points.
We can say that the Ist
wave of risk took a correction of approximately 50% and
as per Elliot Theory, the main thrust, the main force has
been attributed to the IIIrd wave, whether the wave is
rising or falling. The generation point of IIIrd wave is
907.45 and true to its characteristics, in three trading
days, it reached 1099.80. Thus gaining 192.35 points
within no time. Since then the market has been showing a
strong tussle between bulls and bears. Elliot say that
the IIIrd wave has to be larger in length than Ist wave.
The length of IIIrd wave can go to 1.618 or 2.618 or
3.618 of Ist wave.
In the present case, the
length of Ist wave has been 216.20 points. Adding this to
the starting points of IIIrd wave, we get the level of
Nifty as 1123.65 points. As per Elliot, if the Nifty does
not exceed this level of 1123.65 then it would be termed
as IIIrd wave failure which shall amount to the
termination of this bull phase. Bulls will have to take
the Nifty's level higher than 1123.65 with heavy volumes.
Otherwise, this rally shall stand fizzled out.
Rakesh Bedi is a Technical Analyst
(Stocks & Shares)
|
