October 3, 2016

Neowave analysis of markets

Thursday’s sell-off was fast & furious after the news of border tensions hit the market. Structurally, it raises question whether the fall from Monday to Wednesday was “d” and recovery till Thursday’s morning was “e” of the Triangle we assumed inside 3rd Corrective.

Remember, Triangle is a 5-legged pattern wherein legs in both directions “contract”. As can be checked on the chart, in one direction, e was smaller than “c” and “c” was smaller than “a”. On the other direction, “d” was smaller than “b”. (e < c < a in upward direction and d < b in downward direction).

Thursday’s fall broke the b-d line of the Triangle (NEoWave 1st stage confirmation that Triangle is over), and also retraced “e” leg in faster time (which generated NEoWave 2nd & final stage confirmation).

If true, then the 3rd Corrective is completed as a 5-legged a-b-c-d-e Triangle as marked on the charts.

We had warned that as per NEoWave, 3rd is the last Corrective of any Complex Corrective development involving x-waves. This also means even the larger “D” leg from Feb’16 may also been completed.

The NEoWave pattern implication for Triple is 60-70% retracement. So, if 8-monh long “D” leg from Feb’16 (22495/6826) to Sep’16 (29077/8969) is completed, then Index can drop to at least 25000-500 (Nifty 7700-7800) levels, which is around 60% retracement level to “D” leg.

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1 comment:

  1. Structurally, this +ve option would require the Blue alternate labels we have shown on the charts to validate. As per Blue labels, the 3-week fall is marked as “b” of the 3rd Corrective still developing either as a Triangle or Diametric.

    As per the alternate possibility, if 3rd develops as a Triangle, then its “c” leg can open upwards to retrace minimum 50% of “b”. If 3rd develops as a Diametric, then “c” could make a new high of the 3rd.

    If the Index moves +ve in the fresh week, the question would be whether it will form only some upward to sideways corrective phase to the panic fall of Thursday OR open an upward “c” leg as per the alternate Blue labels.


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