Thursday, March 19, 2015

Nifty path ahead: Time cycles & Neo wave

Bottom Line: Nifty continued to move in trendless fashion with no clear direction. Positive move expected today after strong up close on DJIA!

Nifty daily chart:

Nifty 60 mins chart: 
Wave Analysis:

In previous update we mentioned that In short, one should trade cautiously during non trending market environment and the current scenario looks more prone to selling on rallies and buying on dips rather than selling on break of support levels.

Nifty traded in red territory for most part of the day within a range of 8747 and 8664 levels. Prices failed to show a close above the hourly Bollinger Bands which we cited as important for resumption of uptrend. Also so far the level of 8750 is also protected which is the short term trendline resistance. A strong Gap up opening above this level which is sustained for an hour will indicate positivity.

54 days Time cycle: This time cycle is different than the 49 days topping time cycle that we use to identify important tops whereas 54 days cycle shown on daily chart is a bottoming cycle. This cycle is in close approximation to Hurst Nominal cycle of 56 days and we can see important lows near this cycle. This cycle is in its 48 days and a low should be formed within 4 to 6 days, which means that we can see an up push up for 2 to 3 days but then a down move near cycle low before the uptrend resumes as shown on daily chart.

Identifying pattern using cycles:We combine cycles in a different way to help us identify Neo wave patterns. As per cycle theory we should start wave g of diametric pattern after f is complete which will last for around 4 days. This wave g can also be in sideways correction which is currently ongoing and prices will not cross 8850. From basic Elliott wave perspective we are currently in second standard correction which looks complete and now another x wave can form on upside.

On one bigger degree, as shown on daily chart, prices have shown contracting behavior and is now moving in expanding pattern. This is again a 7 legged Diametric pattern with currently f leg under formation. Post completion of f leg a final g leg on upside should come that will retrace nearly 80% of the recent fall from 9119. Again, Diametric is 7 legged pattern with each legs corrective in nature. This pattern is therefore difficult to trade as there is lack of momentum even after breakdown of crucial supports or resistance.

In short, we can expect Nifty to move as per the path shown on the daily chart by combination of Time cycles and Advanced Elliott Neo wave patterns. It will be crucial to observe if a Gap up opening is sustained by closing. We are now monitoring the short term structure very closely in case there is any deviation from the path!

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