Is the Nifty is Heading to 4530-4860-5350?

It has been a long and arduous scaling down from the peaks for the bulls, and after being bludgeoned yesterday, today's rise was a welcome. Nifty opened around yesterday's close of 4190, and shot up about 70 points. Subsequently remaining almost throughout the day in extremely bullish territory, notched a day's high of 4327, before closing at around 4315.

The day is what candlestick practitioners would call a Bullish Engulfing. This has also closed all the down gaps, thus negating the cluster Island reversal that had raised its fearsome head.

However, an interesting scenario awaits traders, which may hold a lot of promise for the bulls. Even since the collapse from 6000 levels, and the first rise to 5300 levels, we have been following a downward parallel channel, toggling between the top and bottom limits of this channel. The last time the Nifty kissed the boundaries, it had formed a double top at 5160, from where it viciously slipped down to 3790, which was the lower boundary of the parallel channel.

It is from 3790 that it gets very interesting.

For one, we have a rise to 4530 and then a subsequent gapdown to 4190 yesterday. This appears to be either an W1 rise and an assumption that the W2 wave got over yesterday. Today's wave could be the start of a W3 and whether it actually is a W3 and not a C wave, would be proved tomorrow or in a few days.

If this is indeed a W3, we would be approaching 4880, a point at which the Nifty would crack its parallel down channel, and rise out of it, indicating a bullish scenario for the whole of August. If this is a C wave corrective, the we would find it difficult to proceed beyond 4530, and should return downward to kiss the lower boundary of the parallel channel, which could be around 3800 and lower levels. It is this case, that most analysts have been focusing on, and which has been doing the rounds on various forums and channels.

There is a reason to feel optimistic for at least until September 19. For one, crude prices have started to tame, and unless some unknown reason crops up, technically it looks like crude is heading downward for some months.