Just like economy has its recession and booming cycle, similarly
each stock and indices has its own cycle of topping and bottoming. Time Cycles
are used to predict the turning points when used with other aspects of
Technical analysis. Cycle lows are normally used to gauge the time period of
cycle and accordingly helps in estimating when the next low will be formed. We
have been using Time Cycle along with Elliott wave technique to tap the turning
points of Nifty 50 and other stocks.
Below are the charts with detail analysis on Nifty showing why we
turn bullish or bearish based on Elliott wave counts and Time cycles!
Nifty daily chart - Time cycles applied
In the previous monthly update published
in early September 2018 we mentioned that “the overall trend looks matured and we have
started seeing the volatility. The indicators have entered into extreme levels
but it has been more than 22 weeks since we saw lower high and lower low on
weekly charts. This week we closed below 11595 which is negative close below
prior week in nearly 22 weeks. So it is time to be cautious for sure and post
this short term up move is over the downtrend should resume. This is another
way of following the trend. To avoid the confusion and put it simply the trend
looks matured and next few days are crucial for confirmation. Fresh longs
should be created with caution. A decisive move below this week’s low of 11393
is important which will be first sign of concern that the trending move is over
and the Price and / or Time correction is starting! The
ongoing mania is going to culminate equally fast and one should be quick to
change the stand as and when it happens.” BANG ON!
Following was published in
monthly update on 8th October 2018:
Nifty moved precisely as expected
and prices started the BIG correction. We can clearly see that the ongoing
mania on upside culminated equally fast and now the optimism has turned into
pessimism. The severity of selloff seen across the board was earlier witnessed
only in 2008.
If you look at the entire rise in
the form of wave g has been now taken out in less than half the time than wave
g took to form. This strongly confirms that the top has been in place and the
same should remain protected for months to come. The entire tide has turned and
now the buy on dips market has turned into a sell on rallies. It is best to
avoid catching a falling knife even though short term pullback from oversold
state is not completely ruled out.
Monthly chart: We are showing important tops formed as per
Figure 1.(shown in actual monthly research report published to subscribers)
2008, 2010, 2015 and now in 2018. All of these tops have resulted into a down
move of atleast ……….. months and the maximum of ………. months. If we take the
average of this then the current fall can extend to the extent of ……… months.
Also in terms of price the fall has been anywhere between ………… points. Taking
the averages of all the fall then we can expect a correction of approximately ……….
points in over ………. months. The reason for expecting the average to be
maintained is that prices are moving precisely within the channel and has been
reversing from the upper resistance trendline. So there is a tendency to retest
the lower trendline of the channel which is also coming near 9??? mark. So we
can expect the ongoing medium term trend to come down towards this level. As
the indicators are in oversold state short term pullback cannot be ruled out
but that is only going to be temporary. There is also negative divergence on
monthly charts.
Neo wave pattern: As shown in figure 2, prices might have
completed the primary wave (1) on upside and now have started wave (2). As the
entire rise was corrective in nature there is high possibility that this rise
was first leg of a Terminal pattern (Ending Diagonal). The only impulse pattern
in which waves 1, 3 and 5 are corrective is Ending Diagonal. Also in this
pattern there is tendency for wave 2 to retrace nearly 61.8% to 76.4% of the
rise which gives the downside zone as ……….. thereby giving the average
bottoming area as 9???. So the levels derived using different methods are
giving the similar outcome.
Short term pattern: …..
Time cycles: The cycle top was formed early and now the
bottom is only by 1st or 2nd week of November. Volatility
is going to be high and one has to be quick in booking partial profits and
trailing remaining to make the most out of the ongoing trend.
The next cycle low will be in November and
before that we should start seeing reduction in volatility and some base
formation. So, are we starting this bottom pattern formation? I think we might
soon provided the important support levels remain intact for a few days. Its
time to get ready again when majority might be caught offguard. But again, only
if the important support level remains protected and we see faster retracement
above the last falling segment which is still awaited.
The above analysis clearly shows how
well the cycle theory works. To know what are the different cycles that can be
applied, on stocks as well as major indices and other various techniques. Get
access to monthly research report along with short term equity research report
- The Financial Waves short term update.
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