Nifty confirmed the beginning of a downward wave by falling about 450 points, which is bigger than any intermediate fall during the rally from June 2012 bottom. Thereafter the index has rallied by almost 300 points in just four days. This confirms that wave ‘a’ of the down-move is complete and wave ‘b’ has begun. This wave ‘b’ could turn out to be a Flat pattern, a Contracting triangle or even a Diametric. Right now, I can only say that the pattern in wave ‘b’ position is likely to be a non-directional one oscillating between two values of NIFTY (5663 and the other yet to be confirmed).
During my last few posts about NIFTY, many had doubts and queries about the structure I had presented for the entire FLAT pattern (a-b-c) from January 2012 to January 2013, especially the pattern in wave ‘b’ position.
Wave ‘b’ here is a Neutral Triangle having five legs from A to E as shown.
Neutral triangle being a newly discovered pattern under NEoWave, not much is known about its occurrence in real time charts, especially in Indian markets. I do not know whether it can occur as wave b of a FLAT pattern, but I am assuming so. Since the pattern terminates at a much higher level (5217) instead of 4770, my only requirement was a swift and violent break-out crossing the top of the triangle (5630). Since that has actually taken place as wave 1 of wave ‘c’, I am assuming that my interpretation is fine.
As per NEoWave theory, FLAT pattern is the only place where wave b can consume substantially more time than wave a. According to Glenn Neely, time of wave b could go up to 5-6 times that of wave a. In the above mentioned FLAT pattern, wave ‘a’ has taken 30 days and wave ‘b’ has consumed 137 days. In such a case wave ‘c’ must take at least about half the time of a and b combined i.e. 84 days. In our chart wave ‘c’ has taken 98 days to complete.
If wave ‘c’ is assumed to begin at 4770 instead of 5215 then several important rules like extension rule, touch point rule have to be broken. In general, I am not in favour of breaking any rule.
One more aspect of the post impulse behaviour is that the 2-4 trend line is broken vilolently by the market confirming end of an impulse pattern. This is not observed during the recent fall of NIFTY if wave ‘c’ is assumed to begin from June 2012 bottom.
It appears now that in the intermediate term we are in wave E of the pattern that began in January 2008. This wave may roughly follow the path shown by the dotted line.
It remains to be seen whether it falls below 4531 or not in the coming months to decide what the larger picture looks like.
A complete reassessment of the presented pattern would be required if the index makes a new 52 week high (above 6112) in next few weeks.