Nifty Fractal nature: Astonishingly similar Fall of 2011 and 2015, to capture next major trend!

Bottom Line: Nifty is in range. Break above 7855 or below 7730 is required to see trending move.

            

Nifty daily chart:

Nifty daily chart: Fall of 2011

Nifty daily chart: Fall of 2015

Nifty 60 mins chart:

           

Wave analysis:

In the last trading session, Nifty traded in red territory for the first few hours and post that bounce back was witnessed towards 7846 level but prices failed to take out the resistance of 7855 level and moved lower towards 7776 level. This has been keeping the near term trend of Nifty in range.

Power of Fractal: Elliott wave is based on the paradigm that freely traded markets exhibit fractal nature and patterns tend to repeat. It is this power that gives us predictability and value to technical analysis. It has been many times we have been comparing the fall of 2015 with that of fall of 2011. It is prudent at this stage to see both the charts together and try to see the key areas of reversal.

Nifty daily chart: Fall of 2011 shown above clearly exhibits complex nature of fall and how it was confined within the downward sloping red channel.

Nifty daily chart: Fall of 2015 - The current fall is of very similar nature with a channelized correction between red lines. Also the violent move seen in last week of August 2015 very closely resembles to that of the fall of August 2011. There is absolute no difference in the serious selloff seen during both of these scenarios. In both 2011 and 2015, post the fall of August we saw an upward swing towards the channel resistance and then during the final down leg Nifty formed an Ending diagonal pattern – Wedge shaped correction in 2011 and it is very much looking like forming a similar wedge shaped pattern even now.

The similarity of pattern doesn’t end here. It is extended to the indicator as well. Look at RSI during the final stages of correction in 2011 and also at RSI currently. There has been a clear positive divergence and double bottom retesting the 30 zone.

Post pattern implication: If our reading of the similar pattern is correct than we can expect a similar outcome that was seen after completion of 2011 fall. There was a strong rally witnessed in early January 2012 that resulted into more than 1000 points of up move. (Just for reference this up move was predicted near the lows in the daily research published during 1^st week of January 2012 before the rally started and can be shared for reference). We will not be surprised even this time to see January 2016 forming a very important low and then a strong trend on upside emerges. However, one should wait for positive confirmation and higher high higher lows formation on daily scale to confirm reversal in a yearlong downtrend.

We took strong cautious stand when Nifty touched 9119 in March 2015 and warned about the upcoming correction on downside. Things are now repeating in similar fashion but in opposite direction.

One important difference: During the final stages of fall in 2011, prices came close to the lower end of the red channel however, in the current fall the red channel is now near 7450. I do not think Nifty will be going this far on downside and will probably protect 7540 levels but it cannot be completely ruled out.

In a nutshell, if our reading about Fractal nature and Time cycle is correct than we are in final stages of down move that started in March 2015 and post its completion we should start seeing a strong uptrend to emerge. The up move in early 2012 was more than 1000 points when Nifty was at 4500 levels. I do not want to get extremely optimistic but a strong break above 7980 will be first sign of positive breakout.

Over short term, one minor push on downside is plausible and it will be only on faster retracement above last falling segment i.e. above 7980 followed by 8100 we will get both Price and Time reversal! 

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