Nifty took a correction but rose again with a smaller impulse showing not ready to give up. Markets are overbought both on hourly and daily time frames. Considering “minor” waves 3 and 4 completed as shown above we are onto the 5th wave now, which shows signs of extending.
In Elliot Wave Theory, the typical range for the extension of Wave 5 is between 1.618 and 2.618 times the length of Wave 1. This is known as the “Fibonacci extension levels” and is based on the Fibonacci sequence, a mathematical sequence where each number is the sum of the two preceding numbers (1, 1, 2, 3, 5, 8, 13, 21, 34, 55, etc.).
Above I have given the Nifty 5th wave extending as seems to be “subdividing”.
The extension of wave 5 is often the longest and strongest wave in a bullish trend and the most violent and sudden wave in a bearish trend. However, it’s important to note that the Elliot Wave Theory is a subjective approach to market analysis. There is no guarantee that the Wave 5 extension will fall within the Fibonacci extension levels.
However, as mentioned in the figure above, IN CASE the level of 17770 is breached on the downside, the above count of wave 5 extending is canceled FOR THE TIME BEING and we must again watch for probabilities.