Is Nifty heading for a breakout with a potential target of 11,349?

Nifty should register a breakout in the next two sessions with a strong close above 10,870 levels signalling the beginning of short term uptrend.

The year gone by has left some bitter memories for bulls as they had to lick their wounds when Nifty resumed its ferocious down move for the second time in the year from the absolute highs of 11,760 registered in last August.

The index after registering a record high retest 10,000 levels for the second time where it appears to have registered a double bottom kind of formation on the charts.

But, the ensuing rally of the last two months from the lows of 10,005 registered on October 26 last year is equally frustrating as it got stuck up in a larger range with overlapping chart structure which is an indication of a corrective up move but not a fresh bull run.

However, from a 'Neo Wave' perspective, the said rally unfolded in seven legs with the similarity of the time frame between each leg which are market in alphabets with a – 'g' as shown on the chart.

This kind of similarity of time is found in a Diametric formation of a Neo Wave analytical technics, which develops with a contracting as well as an expanding structure and comprises seven legs with each leg consuming almost similar time frame as shown on the chart.

If this observation is true then the said diametric corrective structure might have completed at recent highs of 10,985 registered on December 19 last year.

But, once the diametric formation is over then the subsequent move is very fast and in the direction of the larger trend that is down. But, that is not the case with the current behaviour of Nifty50.

Hence, the said diametric structure can be a part of the bigger pullback rally which seems to be having more legs on the upside.

This diametric structure is getting separated by one more corrective structure, which is clearly looking like a contracting triangle from the highs of 10,985. This can be labelled as ‘X’(or B) wave to separate between two corrective structures, which should ideally pave the way for one more corrective structure on the upside once it gets culminated.

If this contracting triangle is in place from the highs of 10,985 then there is a bright chance that this structure might have culminated at Friday's low of 10,739 and should register a breakout in the next two sessions with a strong close above 10,870 levels signalling the beginning of short term uptrend.

In that case, a target close to 11,350 can not be ruled out going forward.

This outlook will get negated if Nifty slips below 10,626 levels.

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