September 12, 2016

Neowave analysis of NIFTY by Vivek Patil

... maturity of rally indicated that upward “a” leg is over, and downward “b” leg has opened.

The global cues over the weekend are extremely -ve. As a result, Index could open gap-down as we begin the fresh week. Last week was truncated (Monday was holiday). The fresh week will also be truncated (Tuesday will be holiday).

Last Tuesday, Index showed gap-up action. After Friday’s sell-off, while Sensex is holding above Tuesday’s gap-up area, both Nifty & Nifty Future are already testing their respective gap-up levels, indeed threatening to move below it with a gap-down open in the fresh week.

Therefore, if today’s action opens gap-down, and the same remains uncovered by the end of the week, then it could form into an “Island Reversal” pattern on the weekly charts of Nifty/Nifty Future, which is a pattern with -ve implications.

Structurally, we’ll initially consider the fall starting from Friday to be as “b” leg of 3rd Corrective.

Last week we argued that 3rd Corrective could develop as 7-legged Diametric or 5-legged Triangle. This was because the 1st as well as 2nd Corrective inside the larger “D” were both Diametric patterns.

By NEoWave, inside a Complex Corrective development (which we are assuming inside “D” from Feb’16), the progression of patterns should be from severe to same or lesser severity.

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