The Elliot Wave Analysis is an effective Light house for me to keep my Trading Boat steady . It gives us probabilities by counting the waves and following the hard EW rules to see the coming weather (Trend).
Note: I have edited this Post for the Alternate count subhead .The alternate count mentioned had been invalidated on trading below 5400 level . Please check the Post again.Thanks
In Preferred count that I am following is that we are trading in (iv) minuette of the iii Minute of the 3rd Minor now.
Probability # 1
If the above count is right than the wave (iv) should not cross the wave (i) region at 5418 level ,as per EW hard rule. This means that it can cross the 'Blue channel' marked in the chart and will come down again in the channel for a (v) ,which can retest the lows or form a new low and effectively complete the iii wave.
The ratio count of wave (iii), from 5556- 5177 ,shows resistance at Fibo level of 5367 and 5410 .
The Market dynamics may oblige this wave count by trading in a range this week below 5420 level and then going down further next week which is the Feb. series settlement week due to 'buy on dips' and long build up liquidation scenario.
The Point of Invalidation remains the 5418 level to keep this count right.
Probability # 2
If the Market starts trading above 5420 level , than effectively the Minute wave iii has ended at 5177 level and we will trade in the iv - 3. This will cap the upper range at 5690 level which is the region of wave i . The Fibo chart shows various resistance level which also has the 200dma level in between.
This will mean a effective cross of the 'Red' trendline in the second chart for the iv th wave , trading below 5690 and another fall for the v th Minute wave to a new lows .This will keep the markets range bound till mid March or more before a further fall .
Remember the Game Changer level remains 5690 as per the EW count , violating this level will mean the invalidation of the Minor wave 1 also, which will change the Medium term out look too.This will bring us back to the drawing table to search for the Alternate count . 'Pending 5th scenario' since 4675 and this correction being treated as a-b-c correction of the 4th, has been invalidated on breakdown below 5400,the region of wave 1.
see the EW chart in the Weekend post of 23/01/11 -
Read the reference Post for Game Changer Levels - Key To Trade The Market-