Adani Power has rallied about 200 per cent in the last one year compared to about 16 per cent upside seen in the Nifty50 in the same period. The stock is showing signs of fatigue at higher levels, and there are higher chances of consolidation in the near term.
Adani Power has increased multifold over the past few months. The stock has shown one of the strongest rises and the majority of the traders or investors are waiting for dips to buy.
Let us understand from the Elliott Wave perspective the probable areas and target levels for this stock.
Adani Power Daily chart
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Elliott Wave Analysis
An impulse pattern is comprised of 5 waves in the direction of a bigger degree trend. We can see that the rise has been strong and sharp since the lows formed near Rs 95 levels in the form of wave (3) in this stock. This is the power of 3rd wave.
The target on the upside as per the arithmetic scale is achieved at Rs 310 levels. This is also 1.618 times that of wave 1. It is a tendency for wave 3 to travel to the extent of 1.618 or 2.618 times of wave 1.
As of now, we can see some reversal signs from this level, and also prices are near the channel resistance zone.
So, from here we can expect consolidation or dip with support near Rs 225 as long as Rs 310 remains intact. So, we can expect a non-trending move over the next few weeks from here on.
The 20-day moving average is providing very good support to prices. The support as per this is also near Rs 225 levels for now.
The Relative Strength Index (RSI) is also overbought so some consolidation or correction is possible. Elliott wave also suggests wave 4 formation here before the next leg begins on the upside.
In a nutshell, by applying the Elliott wave and simple Moving average concept one can understand the maturity of the trend, identify that the bigger trend for the stock will remain positive and after the brief pause the rally can continue.
A move above Rs 310 will take prices towards the next Fibonacci level near Rs 440, and on the downside, Rs 225 is an important support to watch out for.
(The author is the Founder of WavesStrategy.com and Ashish Kyal Trading Gurukul)
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