Will Nifty follow the 6 to 7 days rally pattern?

Nifty Daily chart

Nifty had a big Gap up opening yesterday following the oversold state. We have been expecting positive move up since past 3 days when the break of 4720 turned the last set of bulls into bears. But we had our indicators and wave analysis in place that helped us to predict the turn up again which would have come as a surprise to many!

Nifty daily chart shows a big blue candle out of the downward channel. The trend over short term has changed towards up.

However a close observation of the above Daily chart reveals a very important fact that in all prior instances (since the fall started in November 2010), after every steep move down Nifty rallied fiercely up for 6 to 7 days and ended that rally with a spike. It then turned down on the 7^th day taking back prices to where it started matching the momentum of uptrend. The magnitude of rally has ended between 38.2% - 50% on prior occasions. If the similar pattern and cycle has to continue we will rally for 4 more days (2 days of rally is complete) till 4940 levels and should turn down from there with a spike.

Time will tell if this short term cycle is still intact! In short, the trend remains positive for this week and strong resistance comes into play around 4920 – 4940 levels.