Friday, June 17, 2016

Hurst’s Time cycle to predict Neo wave Diametric pattern and Channels!

Nifty managed to protect the lows of 8060 in the previous session and continued to outperform the Global markets!

Nifty daily chart:

Nifty daily chart:

Wave analysis:

In previous update we mentioned that, “In short, it is now prudent to wait and see if the up move was only a temporary affair and prices start showing weakness again below 8060 or manages to generate momentum above 8265 for positivity to continue.”

Nifty gave away all the gains of earlier session and closed negative after just 1 day of temporary pullback. However, prices managed to protect the lows of 8060 which we mentioned as important to cross for downtrend to resume. Post touching 8074 levels there was recovery in second half with index finally settling near 8140. Such movement can be expected because after a sharp up move from 7715 levels we will not see sharp corrections. Many will try to enter now who missed the rally on upside which will result into frequent intermittent pullback. This is also typical to the behavior of wave (f) of Diametric pattern.

Hurst’s Time cycle: Let us again visit this Time cycle method that has helped us to forecast the pattern for many months now. As per Hurst’s Time cycle there are certain nominal cycles which work across markets on different time frames and the key is to identify the actual cycle in close proximity to the nominal cycle. We identified 54 days and 108 days cycle working well on the daily scale for Nifty. This cycle also helped us to capture a low near 6825 levels on 29th February when the majority was focusing on the downside breakout. Along with that channel also provide important reversal areas.

54 days and 108 days Time cycle: The cycle low on 29th February was of both 54 days and 108 days low. This is the reason the movement out of it was sharp and fast similar to that on the previous occasions. The next cycle low is again due in early August which will result into an important bottom formation. Normally cycle tops out in second half of the period. So a 54 days cycle will show some tiring behavior post 27 days. But the problem for catching a top is that a higher degree cycle can be in up-trend thereby resulting tops to be disbursed. But during low formation all the cycles get synchronized which results into sharp or panic low formation. Therefore cycle analysis is more useful for catching a low rather than tops that are disbursed. Nevertheless, we can still derive some indication towards maturity of trend by looking at the age of ongoing cycle.

For now to identify a good trending move, it will be post 27 days of 54 days low a strong downtrend should start kicking in. So far the 54 days cycle is only 17 days old and therefore the current trend is not strong on downside.

The pattern that fits into this Time cycle scenario is a Diametric pattern in second correction which we has been working very accurately so far. This is the reason why we are assuming the current leg as wave f of Diametric pattern that is currently ongoing and post its completion we should again see wave g on upside. Second Nifty daily chart shows the internal counts of the recent up move.

In short, it will be on break below 8060 we can expect a move towards the channel support which is near 7950 – 8000 whereas move above 8265 will indicate start of wave g on upside. Until then trade cautiously in this volatile but range bound market!

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