Nifty Path Ahead by using Advance tools
Jan 29, 2025
Time Cycles is a very important Technical Analysis study and is surprising that such basic concepts are rarely focused by traders. When we combine Time cycles with Wave theory we can see witness interesting results.
Neo wave along with a Time cycle helps to form powerful setups with a good accuracy. See detail below research on Nifty which is picked up from the Monthly report of January 2025.
Figure 1: Nifty Monthly Chart Anticipated as on 22nd January 2025
Figure 2: Nifty Weekly chart Anticipated as on 22nd January 2025
Figure 3: Nifty Daily chart Anticipated as on 22nd January 2025
Figure 4: Nifty Gann chart Anticipated as on 22nd January 2025
Nifty PE ratio:
Nifty formed a top in the month of September 2024 near 26277. Post that it has been 4 consecutive months including January that we have not seen any attempt to close above prior month’s high. This keeps the overall monthly trend on sell side. Earlier instance where we have seen such price and time correction was from October 2021 to June 2022. This lasted for approximately 8 months before we saw positive reversal. If January closes below prior months low of 23460 we can then expect the ongoing correction to last for another 3 to 4 months before a meaningful upside thrust.
Bank Nifty has formed a wedge shaped pattern and gave break down from the same. This remains concerning and is explained in detail in subsequent section.
The selloff we are witnessing since September 2024 has been systematic and is led be interest sensitive sector. We are yet to see reversal in the interest cycle and with Dollar index moving up inflation will remain a concern. Delayed response by RBI to tackle the situation with a rate cut is only going to derail the economy.
SEBI action to curb down speculation by way of increasing margins on the Expiry day via ELM and increase in lot size has resulted into liquidity squeeze. This has in turn resulted into sharp swings on the index and even options prices which on many occasions has started deviating from the norm, giving sharp spike like movements making it difficult even for big players to hedge their positions and manage the risk. Participation by retail traders is important to provide the cushion and depth to the market. If the selling pressure intensifies further from here this will only result into further wild swings both in underlying and option pricing. It can then lead to spiral effect of unmanageable risk which will force regulators to take corrective steps again and encourage retail participation in the market.
Risk management – We are in unprecedented times which was not seen post Covid2020 lows. Traders who have been looking at markets as money making machine will be punished if there is no proper risk or money management strategy and only the smartest will survive. This is necessary to get most of the novices out of the market before the next major bull market resumes its up move!
Time cycle 85 weeks – It was in October 2024 when we mentioned about the 85 weeks cycle which remains on sell side until 3rd week of February 2025. We also mentioned in previous monthly research that the up move is in form of wave b and post its completion we should resume wave c lower. Prices failed to show any strong positive attempt in January above the Gann level of 24728 and reversed sharply lower. We can clearly see the pressure that these bigger cycles can put on prices. We expect ongoing volatility to continue atleast until February end and if the correction extends for another 4 months as mentioned earlier we can see it until May 2025.
Neo wave pattern - Nifty weekly chart clearly shows that prices are moving down in the form of wave (D) after completing wave (C) at the top of 26270 levels. This wave (D) can retrace down to 21281 levels which is 4th June 2024 election day low. Events high and low are important and act as a magnet. Now that the high of Election day is broken on downside it has opened downside targets for 21287 which will be sufficient to get majority of the traders out of the market.
Post Covid there has been exponential rise in number of demat account holders and they have never witnessed any systematic correction. This will be a litmus test for those traders and more than 90% of them will be out of the market if not already.
It will be only on move back above 24226 highs that will be first indication for completion of this wave (D) on downside and probable reversal higher in form of wave (E). We think a few more months of down – up – down move is pending before major trend reverses back on upside.
Nifty daily chart shows the internal structure of ongoing wave (D). The fall has been in form of Diametric pattern and prices are currently in wave (e) right now. This wave (e) will be equal to wave (c) near 22877 levels. So, short term upside pullback is possible from there as we enter into 55 Days time zone also. However, unless we see push above 23420 on daily closing basis it is best to sell on rise.
Nifty PE ratio – Nifty Price to Earnings chart shows the range within which PE ratio is moving post Covid 2020. We can see that the extreme reading on upside is at 24.20 and on downside it is at 20 levels. Trailing PE ratio currently is at 21.4. So, markets are still not under-valued as of now.
In a nutshell, the ongoing market warrants for traders to be ready to change the stand quickly in order to survive the volatility else will be crushed if stuck on either side. We are witnessing down move in form of wave (D) which can complete between 3rd week of February 2025 to May 2025. Lower levels that remain open on downside is the election day low at 21281 as long as 24226 remains intact on upside. These are broad levels from medium term perspective. Over short term, 23420 followed by 23590 is must for positive reversal whereas any breach below Gann level of 22877 will extend the fall to 22480 over near term.
Strongest of the minds with prudent risk management strategy traders are going to survive and rest will be out before the major bull market roars again!
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