Nifty Fractal nature: Comparing the ongoing up move with 2014-2015 rally!

What should be the trading strategy post RBI policy announcement? It is better to look at the Fractal nature and Elliott wave pattern.

We believe that market does not move in random fashion and it forms different kind of patterns as per Elliott wave theory as well as basic technical analysis which can guide us for the upcoming trend.

There are times when markets do form similar patterns between the different time periods which is called as Fractal nature.

Below we have shown 2 charts of Nifty. First chart is of 2016 and second chart is of 2014-2015 which shows up move in form of Expanding pattern! Isn’t it surprising to see the development of similar pattern!! “The Financial Waves Monthly Update” is published which covers in-depth research on Nifty, BRIC Nations, one stock from long term, Comex Gold, Dollar index  and Mutual Fund investment.

Figure 2: Nifty daily chart

(Elliott wave counts are purposely removed from above chart and are shown in actual research report)

Figure 3:Nifty daily chart for 2014 - 2015

Nifty continued to move higher in the month of July and formed a bullish bar with low near 8287 and high near 8675. Since the low formed at 6825 we have not seen a single bearish monthly candle formation and the low of previous month have been decisively protected. Bar technique is one of the simplest and most objective way to understand the direction of the trend and the method is completely unbiased. As per this technique …………

GST and Euphoria: The much awaited GST Bill was passed in Rajya Sabha on late evening of 3^rd August. On next day index we had a gap up opening near 8600 levels but prices entered into red territory immediately. This was pointing towards the fact that the news was already discounted. Nevertheless, it seems markets are reacting a day later as there was a strong gap up opening on 5^th August and buying was seen throughout the day. ……

Comparing the current rise from 6825 with that of 2014 – 2015 rally: Look at the rise in Figure 2 and Figure 3 closely. Both the patterns show expanding behavior. Movement from the lows of 6825 matches the pattern of 2014 – 2015 very closely. Also the final leg of up move in wave e formed an Extracting triangle pattern with rise getting smaller and fall getting bigger. The recent pattern in form of wave e looks similar where each of the rise has been smaller but falls are bigger. This concept of seeing similar patterns at different time and degree is known on Fractal nature.

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Nifty Fractal Nature: Why similar patterns are seen across different time frames?

The below research is by Waves Strategy Advisors. For daily free update register on www.wavesstrategy.com

What is Fractal Nature? We are re-visiting that concept to explain the latest Fractal nature seen on Nifty.

In previous articles as well we have mentioned - Humans behave in a manner, when given a stimulus, in similar and probabilistically predictable fashion. This behavior of acting in similar ways makes us no different than the other creations of nature. Freely traded markets are the only sources that reflect the collective behavior of humans and the current social mood. Highly liquid markets cancel out the random events and what is left is the social mood of the mass and that indicates what we can expect in the future.

Indian markets have been exhibiting a similar structure on different time scales very often. The importance of Fractal nature confirms the existence of repeatable patterns on different degrees that makes the market movements predictable.

Nifty 60 mins chart (left) / Nifty weekly chart (right)

Fractal Nature example:

Nifty exhibits a classical fractal nature with prices showing similar pattern on 60 mins chart shown on the left side and weekly chart on the right. The fall in August 2013 can be compared to that seen in 2008, post that the rally September 2013 is similar to rally of 2009 – 2010. Post that Nifty is moving in sideways action and managing to protect the high made at 6415.

Such developments are indeed a thrilling experience and are exactly the reason why patterns like triangle, wedge or Head & Shoulder keeps occurring on different time scales.

Isn’t it astonishing to see such similarities across time frames. Fractal nature is one of the foundation on which Elliott wave patterns are based.

Everything in this world is systematic & patterned and there is no place for randomness to exist for extended period of time. We are against the theory of Efficient Market Hypothesis that claims humans are rational animals. This is against the law of nature and humans do deviate away from rationality and choose the path of herding thereby exhibiting trends; patterns of repeatable forms / structures, making it plausible to predict the markets.

There is no chaos in this perfectly rhythmic world which is driven by the laws of nature and freely traded markets like stock markets are no exception!

Nifty moved exactly as Fractal Nature & Elliott wave suggested!!!

Nifty moved exactly as Fractal Nature & Elliott wave suggested!!!

By Waves Strategy Advisors, For information on various research reports visit www.wavesstrategy.com or write to helpdesk@wavesstrategy.com

We published an article on Nifty: Using Fractal nature to predict future price action on 17^th April 2013. 

Nifty was trading at 5680 then. We compared Nifty Fractal pattern to that of January 2012 rally and mentioned that if our Fractal analysis is correct prices can have similar post pattern implication and should move towards 5900 – 5950 levels. Nifty spot has made a high of 5909 as of now in just 5 trading days.

Recent sharp move on upside from 5545 level might be surprise for many market participants but our subscribers were aware of this pattern and prices have moved exactly like that. The below charts explains it all and requires little justification!

Nifty chart: picked from 27th February 2012

Nifty daily chart:

Anticipated on 17^th April 2013:

Happened as of today 25^th April 2013, 1:30 pm

We have mentioned in the report of 17^th April 2013, “Indian markets are constantly exhibiting good fractal nature. We are showing a chart picked up from the 27^th February 2012 report that showed a very similar setup that the current chart is showing. A wedge shaped formation was clearly seen near the end of fall of 2011 just before the rally and wave e of the wedge pattern was truncated ……………. and now we can expect an up move towards 5970 as the setup is exactly identical but of lower degree. This is nothing but fractal nature and we will see if this results into a similar type of output”.

Happened:Nifty Fractal Nature worked precisely as expected. Prices made a high of 5909 as of now within the expected zone of 5900 – 5950!!!

Do not get carried away in euphoria and start creating long positions when we expect the move to be in matured up trend. You will start hearing strong positive news as soon as Nifty reaches 5950 levels exactly at the wrong time… The daily research report “The Financial Waves” gives objective reasons justified using technical analysis and Elliott wave analysis for future price action of Indian markets and stocks. See the magic of price patterns as it unfolds before you!!!  

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Nifty: Using Fractal Nature to predict the future price action!

Nifty: Using Fractal Nature to predict the future price action!

Following was published in today's morning report "The Financial Waves" by Waves Strategy Advisors. This research is published everyday morning before market opens. For more information visit www.wavesstrategy.com or write to helpdesk@wavesstrategy.com

The “Fractal Nature” is an important concept which states that repeatable patterns occur on varied time scales and can be seen on 1 minute charts to Daily charts to Monthly charts. 

We have shown such Fractal nature in Indian markets from time and again. This simply confirms that everything in this world is symmetrical & patterned and there is no place for randomness to exist for extended period of time.

Below charts of Nifty shows a clear Fractal nature visible between the current chart and 2011 bottom pattern formation!

Nifty daily chart:

Nifty chart: picked from 27th February 2012

Wave Analysis:

The following was published in the morning research report “The Financial Waves”

We mentioned in previous update, “If market protects prior lows after an event and continues sideways action this shows the prior trend is about to reverse. A similar behavior was observed when 2008 lows was formed which was very well protected after the Satyamscandal was disclosed and the trend changed to upside in 2009. However, that was of very big primary degree compared to the current minor degree….A move above 5600 will open positive possibilities towards 5750 or higher…”

Indian markets are constantly exhibiting good fractal nature. We are showing a chart picked up from the 27^th February 2012 report that showed a very similar setup that the current chart is showing. A wedge shaped formation was clearly seen near the end of fall of 2011 just before the rally and wave e of the wedge pattern was truncated i.e. it ended above the end of wave c. Also the bigger fall was perfectly channelized. Similarly, the current fall has been within perfect channel along with wave e failing to move beyond the end of wave c. Both the charts show positive divergence and a sharp reversal on upside giving the breakout. It was on January 07, 2012 we predicted an up move towards 5650 from 4650 based on the setup, which happened and now we can expect an up move towards …………. as the setup is exactly identical but of lower degree. This is nothing but fractal nature and we will see if this results into a similar type of output.

Nifty finally managed to show a strong closing yesterday and 5600 was taken out quickly as soon as markets opened. The rally intensified further as soon as 5650 was broken on upside. Except IT all the sub indices closed positive.

Indian markets continue to move independent to the global equity markets and sharp drop in US and UK yesterday failed to show any impact. Also in entire 2013 markets have managed to rally on negative news whereas it has fallen on positive outcomes like repo rate cuts. Poor results byInfosys resulted in only a short term spike on major index and the rally started from the very next day.

Positional traders can now follow our trailing stop method and can now trail stops to ……….

In short, we continue to be bullish on Nifty as long as -------- is intact on downside for a move towards ------------!