Education

Nifty: A Study through Time Cycles

Updated

Nifty is in consolidation phase. This may or may not lead to a bear market and let’s not discuss it as of now. I will try to analyze Nifty, on the basis of support and resistance levels and time cycles, for the next possible swing and its direction.

Support and Resistance levels
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It can be seen on the chart that Nifty made a high in Oct21 and faced resistance, followed by a sharp reaction of 11%. It rallied till mid of Jan22 and again faced a sharp larger reaction of 14%. It then rallied 15% throughout Mar22, faced a trendline resistance and reacted 13%

If we draw important support and resistance lines through this price action we get three major levels
-Dynamic resistance level through the trendline
-16780 to 16850 multiple support zone which is now a potential resistance zone
-15670 to 15750 support zone which also coincides with a prior area of consolidation

Time Cycles
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If we look at peaks, there is a 62bar high cycle followed by 51 bar cycle.

In this sequence, the next cycle could have been a 40bars for the market to test trendline resistance. But that is not the case and here the market is at 16780-16850 zone after 40 bar cycle.

This clearly reflects some weakness in Nifty as it was able to cover roughly half the distance on the upside compared to January and March rallies, in almost same number of days. It’s clear that the prior support zone is acting as resistance.

At the valleys, there are 53 and 43bar cycles. The next cycle could be a 33bar cycle where Nifty can either breaks the recent support 15670-17750 or retests it. The 33bar cycle coincides with June expiry so there is need to take a cautious approach on the upside until 16850 resistance is taken out.

I hope this idea will help you to understand the markets another non conventional perspective.
Keep liking and sharing your thoughts.

Disclaimer: This post is for educational purpose only and not a trading/investment advice.

Note

A small correction
The next cycle could be a 33bar cycle where Nifty can either breaks the recent support 15670-15750* or retests it.

Note

The logic behind the cycles is as follows

At the peaks the cycle has been decreasing by 11bars, from 62 to 51. So the next possible outcome could also be -11bars, that is 40bars

At the valleys this difference is 10bars, from 53 to 43. So the next possible outcome could be 33bars

This is pure price based finding. No tools like Fibonacci etc is used.

Note

I would prefer to call it time squeeze where the cycle duration is getting narrower and narrower. Just like price squeeze, a time squeeze is bound to expand and trend in a direction.

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So here we are, testing prior lows in a strong momentum.
We are way ahead of time which means either Nifty will make deeper lows by the EOM or it will oscillate around 15700 before taking a decisive move by that time.
I would personally prefer the latter as in gap down flushout most buyers would be stopped and supply will be less.

Note

Here is another cycle study in BTCUSD

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Still two weeks to expiry and here we are breaking under the previous swing lows of March. Looking forward at increasing momentum and widening of bars on the downside. Under such a scenario theoretically its easier to achieve 38.2% retracement levels mentioned on the chart. The level also coincides with the 1:1 measured move, hence extra weightage to that level.
Also watch my older Nifty analysis attached to this post.

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What I won't like in the above chart is a close above the range because the market is yet to close. So let's wait and watch.

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Longer term analysis of Nifty

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Disclaimer

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