Nifty: The Magic of 76.4% Fibonacci ratio!

Bottom Line: Nifty is following the magic of 76.4% with every alternate waves relating to prior by 76.4%.

Each of the markets has their own individual identity and characteristics.We have to understand the patterns, Fibonacci ratios, price structure that is inherent to that specific market. A specific indictor or Time cycle might work very well for one market but might not work at all for another. It is therefore necessary to see the price movements and feel the charts rather than simply applying a generic technique.

The below article shows the power of 76.4% Fibonacci ratio that Nifty follows very closely and since very long time!

Nifty daily chart:

Wave Analysis:

Magic of 76.4%: Nifty after the strong downtrend from 6340 to 6210 on 2^nd January has been constantly moving in a narrow range. It made a low near 6140 and has been managing to protect the zone of 6130 – 6140. The low made by wave (a) was also near 6130 level. Apparently there was no other evidence for such important support at this level which forced us to measure the relationship between alternate waves. Nifty has for many years respected the levels of 76.4% and 23.6%.

A close observation reveals that each of the up move is 76.4% of previous up leg and each of the down move is 76.4% of previous down leg. The daily chart is clearly showing this measurement. The level of 6130 is exact 76.4% of prior down wave x. From the lows of 5118 each of the waves has followed this Fibonacci relationship. So for downtrend to continue Nifty has to break this phenomenon and move below 6130. Failure to do that will indicate an up move towards ………. (76.4% of prior up wave a is possible).

Short term possibilities: Nifty formed a Doji bar on Friday. The follow-up action today will provide clues on short term direction. Break below the Doji low and 6130 will be sign of weakness and indicate wave c of the Flat correction is ongoing and wave iii of c has started. However, wave ii has consumed lot of time, also Time cycle is due tomorrow or Wednesday and so we are now having little apprehension for validity of this scenario.

If Nifty manages to protect 6130 and closes above 6230 then the other possibility is that a triangle pattern is currently ongoing within the blue trendline shown on 60 mins chart or the upside trend towards ……….. (channel resistance) / ………. (76.4% level) has started.

The above research report was published on January 13, 2014 before equity markets opened. This research report clearly mentioned the crucial level any trader should watch and accordingly formalize the trading strategy for the day. To know what more things are working on Indian markets and where it is headed from here subscribe to “The Financial Waves short term update” our flagship product and get daily research emails in morning. For subscription simply visit the Pricing Page and we will set you up for your daily research reports.