Extended Fifth Wave in BankNifty Index

Elliott Wave analysis is one of the most versatile tools in the hands of a trader, provided he/she knows how to use it correctly. At WaveTimes you have the opportunity to learn more about the Elliott Waves.

Old timers know that my favorite formation is where we see an extended fifth wave. In fact, it has been a recurrent theme in WaveTimes that extended fifth waves can make you rich. You can do a search for that in the web and see the various examples given in this blog. I believe the concept has also been well covered in the book “Five Waves to Financial Freedom”. In today’s post, we will look at a popular index in the Indian markets known as Bank Nifty Index.And you guessed right, we will see another example of an extended fifth wave and what happened next. And importantly,these concepts will work in ANY well traded market, and even if you don’t have any interest in India’s BankNifty Index, I suggest you spend a few minutes to read and understand the Elliott Wave ideas enumerated below.

The way to start counting your waves is from a significant top or low. Let us start with the important top around 13,430 that was posted on May 20, 2013. I suggest that you right click each image and open it in a new tab.

Bank Nifty Index Wave 2

As you can see, the first sell off is labeled as wave 1 and we got a 50% correction of that as wave 2. The next wave down was the third wave, and this was followed by a ‘Flat’ correction as the fourth wave. This fourth wave was 38.2% of the third wave as shown in the Elliott Wave chart below.

Bank Nifty Index Wave 4

After the fourth wave was completed, the markets set off earnestly to the South and we got an extended fifth wave. As you know, a wave is known as an extended wave when its proportion is unusually long in relation to its counterparts in the cycle.

Computing Extended fifth wave in Bank Nifty Index

The extended fifth wave shown above has traveled 138.2% of the distance seen from the start of the first wave till the end of the third wave, i.e. from points 0 to 3.But what happened afterwards is most instructive. True to its form, once the extended fifth wave completed its own minor fifth wave, we got a massive bout of short covering, and the market raced back to the level of wave ii within the extended fifth wave. This is what I have taught you many times in this blog and in my book. Imagine how much you could have made by buying near the end of the extended fifth wave!

My next Elliott Wave chart shows how the rally evolved from the lows. The chart below shows that we got a second wave that came down by 70.7% of the first wave. As you probably remember, there is something known as ‘alternation’ in Elliott Waves. If wave 2 was a simple correction, we should expect wave 4 to be complex. Likewise, if wave 2 was a deep correction (as is the case here) we should anticipate the 4th wave to be shallow. These are all illustrated here for your benefit.

Wave 2 in Bank Nifty uptrend

And finally, could one have anticipated where the fifth wave will finish for teh rally from the bottom? Of course, yes! Remember what you read in “Five Waves to Financial Freedom”? We compute the target for the fifth waves by measuring the distance from 0 to 3 and then calculating some ratios. In the present case, the fifth wave finished exactly at the 61.8% measure of the that move. See the next chart for this.

Wave 5 in Bank Nifty uptrend

Well folks, that brings us to the end of this post. What you need to know is that it is possible to anticipate the terminal points of moves, and while there are no guarantees that it will work, you will have a chance of taking a low-risk trade at those points. Trading is all about taking sensible risks. This is what we should all be doing. I realize many of you still have difficulty in counting waves, but that is a challenge you will overcome with practice. Good luck.
Ramki
https://wavetimes.com/



38 Comments

  • darshan

    Sir where shall it head to next.

  • Prithvi

    Ramki sir,
    Thanks for your view,
    Now can we say that ‘A’ finished at 11219,B finished at 9587 ,and now in wave’C’ start and it’s tgt A=C means A have 2853 point so 12440 tgt for c from 9587?

  • Vivek A

    Hi Ramki,

    Thanks for sharing this informative ..
    Can you please also share your longer term ave counts on BankNifty? To me it looks like that the 5 down was a part of a larger A (I believe all banks are like commodities and move in ABCs). It also looks to me that a B is completed at the 11200 retrace. We are now starting a C that should take us below 7800 soon!

    Thanks,
    Vivek

  • ben

    Re: Elliott Wave Analysis of BankNifty Index
    Arent we supposed to get an ABC correction after a full 5 wave cycle?
    Regards

  • priti

    thanks for banknifty EW analysis. now I will try my next wave counts. again thanks for the book. it is wounderfull. daily i am learning new things and improving my trading

  • piyush

    how does it fit in in long term, is it completion of flat from nov 2010, march 09-nov 2010 looks like a 3 wave so that flat doesnt fit. can u pls guide

  • h.mehta

    dear Sir,

    after completion of 5 waves at 11229.

    has the ABC completed at aaprox at 9550
    oR
    A done at 9550
    now in B with
    pending final C wave dn.

    thank.

  • Dr Sanjay Pote

    Hi Ramki you make it to look so simple but as you rightly said very difficult practically.
    Now as per your book the wave C should retrace till the prior wave 4 on the downside til 11800 levels if I am not wrong. Thanks again for your teaching.
    Regards

  • Vaibhav Kawade

    Hello Sir,

    Thanks for sharing your view on bank nifty and also it help to understand wave Analysis.

    Sir this is a request please advise on VIP Indus (VIPIND) . it seems that this stock has completed 5 down waves and trading above the channel, so as per rule we could see upside into this stock.

  • Ani

    All are perfect technical analysts in hindsight.

    • Ani, I can’t agree with you more. Hopefully, you had the patience to delve deeper into this blog to see my numerous mistakes too. They are all there for you to see. If you learn something, then your time is well spent. Good luck.

  • Naga

    Hi Ani – By showing Bank Nifty analysis, the purpose is not only to analyze events of the past, but if we are smart enough the journey continues and tells us what’s in store next. At least the high probable ones with low risk trades

    I guess that is exactly what Ramki is telling us as well, looking at past to predict future trends

    Ramki – A quick question to understand, does the corrective wave not look like a 5-3-5 zig zag which means a x is on its way followed by another zig-zag?

    Cheers
    Naga

  • praveen

    hi ramki,hope doing well.. if we take deep lo we need count from 1st wave..when we count from Top we need to take (ABC)..bank nifty (1st chart) you counted from 1..can we think that (1 to 5 wave) in A ? in this case B should be 3 wave move ?

    please clarify my doubt..thanks in advance

    • Praveen, Prabh, Naga and others who posted comments on BankNifty…in the final chart on the above post, I have shown a 5 wave move. If that count was correct, then you will know that a correction cannot be made up of 5 waves. The implication is we will get another rally after the correction of this 5 wave move is over. This is what we see happening right now. Often times it is enough to know that the next move is up in order to make money. By the way, dont forget the important clue you get from studying the wave personalities. While the most recent move has been up (i.e. in the direction we anticipated), the personality is hardly in keeping with a 3rd wave….what does that tell you? Go back to FWTFF

      • prabh

        Ramki Sir,

        When you say “Correction cannot be made up of 5 Waves”,in case of ZigZag correction is made up of 5 subwaves.Are we on same page?

        In case of final chart,the 5 wave move that you have shown can that be considered as Wave A which is ZigZag made up of 5 subwaves and the ongoing correction is Wave B and last wave is going to be Wave C which would then mean the complete phase was in the form of A-B-C.

        • Prabh, I am not sure I understood your question. Anyway, in a zigzag, the waves A and C of both the zigzags will be made of 5 subwaves each. Thus you will see 5-3-5/ x / 5-3-5. The c wave can be any shape. Hope this helps.

  • TD

    Hi Ramki,

    Would you please show me on how to count the Eilliott Wave of the current US indexes as Nasdaq, S&P500, Dow Jones. I tried to count them and I don’t know if I counted correctly. They are now at fifth wave in daily time frame, aren’t they?

    Thank you very much in advance!

    TD

  • Sreevatsan Seshadri

    I was looking forward for your analysis on Bank Nifty for a long time and finally it is good to see your analysis.I have read your book and I look the monthly chart and is my analysis correct somehow i am not yet mastered the daily chart wave count and if you can help me it will be great.

    13316 – 7775 -> Wave A
    7775 – 12948 -> Wave B
    13000 – 8355 -> 3rd wave of Wave C

    The Fourth wave of Wave C has completed 11216 and the 5th wave would be 1.618 of the distance of Wave A which might end at 5716 by May 2014

  • GAGAN BAJAJ

    great analysis sir

  • Sanju

    Recently i went through five waves to financial freedom book and also doing lots of research in internet regarding elliot…..
    But i cudnt find any convincing answer to how to know that a particular wave has extended…
    5 + 3 = 8 Waves. (1 cycle) on particular time frame.
    Each impulse is subdivided into 5 waves,naturally they r again subdivided further……
    Each impulse has same quality of extensions,It means when we look at lower time frames each wave has extensions in it……It means all waves are extended in general….thn how come we know that particular wave extended…….But each impulse 1,3,5 has 5 sub waves and all of them have 1 extension internally as its nature of fractal and so how i know that a particular wave is or will be extended????

    • Sanjay, good question. There are no ways to foretell if a wave us extending. But you could anticipate it based on the corrections that occurred before it. More importantly you should ask yourself what is the goal of the analysis. If it is to forecast, you will find some issues. If you are trading, you will be more at ease

      • Sanju

        Ok…
        TA is a game of probability And I Accept….But EW is game of high probability…
        Like At end of 5 Wave move expect big correction……Suppose Wave 1 is extended,i find 5 subwaves of Wave 1 on same time frame chart….(I hope am right).
        Leave what comes next…When i find extended Wave 1 from important low on chart….Then why cant i expect triangles or irregular corrections to occur at wave 2 positions…..why they occur only on Wave 4 or in abc corrections.???
        Am just finding a cycle of whatever length it is on charts….a cycle may occur even within small movement of prices on chart,and why cant i expect that as end of 5 wave move in a cycle and y cant i expect abc correction at the end of that small 5 wave move??

        I think am making things complicated,But thats how i learn…..I want to go in the mind of Ralph Nelson Elliot or did he miss what am thinking….. ;))

  • Abhishek Mittal

    sir the menu bar isnt showing any forum tab…kindly provide a link for the same…
    Thank u..

  • prabh

    Ramki Sir,

    It has been quite a while we have not heard from you about Indian Indices or Stocks.Will appreciate if you can take out some spare time and post charts from Indian Markets.Thanks.

  • Sanju

    In ur 5 ways to financial freedom……u wrote
    NORMAL 3RD WAVE SHOULD TYPICALLY RESPECT RELATIONSHIP INTERNAL WAVES BEAR TO EACH OTHER.

    Can u elaborate what does that mean?

    • Hello Sanju, There are Fibonacci relationships which are often seen between adjacent as well as alternating waves. In a ‘normal third wave, ie a 3rd wave which is not extending, you will see the internal waves have such typical relationships.

  • Sanju

    3rd Wave Must be impulse.
    Is it ok to find diagonals in minor wave of bigger 3rd wave or All 3 minor waves (1,3,5) of bigger wave 3 must be an impulse.

  • prabh

    Ramki Sir,

    I am having question on Wave 4.

    If we see Wave 4 retracing Wave 3 by 0.618 fib ratio, which according to FWTFF is very rare, shall we get extra cautious because that retracment can be even more severe and it becomes Wave 2 of next higher degree.?

    What are your thoughts for same please.

    • Prabh, At any point in time there are several possible ways of counting a move. The goal of counting is to find a low risk entry level. Be guided by the size and shape of wave 2 when determining the size and shape of wave 4.

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