As you could see Green area in chart we had a bad crush in 2008-2009. After the fall Technically we saw a bull rally of 1.6 times of the fall and market made high of 9180 before having corrective move till previous high of 6200 which is also 38.2% of the bull rally which is drawn as white dotted line in Green area.
Similarly, This time also as we can see the white area, Market had fall from 12400 to 7500 and the bull rally also continued till 1.6 times similarly like 2008-2009 and reach to 15400. Similarly , this time also we will see a 38.2% correction of current bull rally before it moves further.
The 38.2% of the current bull market also comes at previous high around 12400 and this is not a coincident but a well known Retracement Theory in Technical. Hence,that we will trade lower till 12400 before entering new bull run.
There are stark differences in the two scenarios though figuratively speaking your are bang on. It was not even one full year for the retracement of the fall and the rally of 1.6 times has happened. One stalwart predicted that with his 30 years of experience (he has four books to his credit and is a prolific writer on the stock market) that now we will see 10 years of bear market before we see these highs once again. You can yourself how long did it take to reach 1.6 times the 2008 fall. Time is a very important factor in all charts. These predictions are fine but we must tamper them with changing environment (increased liquidity, enhanced market participation) to make profits. Profits is all that we are in the market for! What intrigues me though is the figure 12400 which is common with the highs from where the market fell and the 38.2% fall level from 15400. Great effort and historic correlation!
pratiktech
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@sanketsudan, Thank you. 38.2% might be looking big but when you see in real percentage term its just lesser than 20% from peak. However , in other way we can atleast expect a correction phase of 15-20% after having a 100% Bull rally from lower levels, and Strong bull market always need a strong corrective base. So, I don't know what will be the reason Inflation, Bond Yields, Geopolitical crisis, lower demand due to reducing purchasing power or whatever but expecting a small correction about 15-20% before it makes new bull run.
sanketsudan
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@pratiktech, Correction has been long overdue. In the Indian market, increased participation of retail investors, enhanced flows with the mutual funds (it is pretty evident to everyone that money is not safe even in banks) and FII participation (due to falling dollar, good control on COVID) has so far ensured that buyers outnumber the sellers. Market is expected to hit another All Time High before any meaningful correction. Participants are confused with high valuations and retail participation taking the mid and small cap scrips sky high. Dollar is expected to rise once again which perhaps will devalue the rupee and bring about much awaited correction. Meanwhile due to COVID impact developed countries are stuck with bourgeoning fiscal deficits as social security takes its toll. Thanks for your reply and your indulgence.
pratiktech
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@sanketsudan, Sir with due respect but i will just give you a hint. In 2015 when Nifty touch 9180 or similar levels , Nifty hovers there for around 3 months and people forgot that the correction is due before moving ahead. Right now the second month is going on. I can say from my experience that normal retail invetor will get tired thinking about correction and when the market will make again a new high or similar levels. He will think that he will miss the bus and there we will see some profit booking.
This is my personal experience what i have shared. so wait for some more time.
WizSmash
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Does 1.6 comes from golden ratio? Can you draw Fibonacci retracement levels and verify?
pratiktech
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@WizSmash, As you know the Golden Ratio in Fib Retrace are 38.2, 50 and 61.8. But this Ratios are for a corrective move between 0 to 1. On contrary side , There are other ratios of Fib Retrace apart from range 0 to 1. Ratio above 1 means 1.382 , 1.50, 1.618 and so on are studied for the Reversal Resistance after a corrective move. Here I Draw a Fib Retra starting from 2008 high 6400 as 1 AND drag that to the lowest point around 2500 as 0.
Now as market start recovering from lover levels I need to find a resistance level. So if the Nifty touch 6400 again means it reach till Fib Retrace 1 but when it moves beyond that there are other levels like 1.382, 1.5, 1.6 like that. So when you count the difference between 6400 and 2500 and multiply with 1.6 the level of resistance comes around 9180.
Finally when we have rally from 2500 to 9180 its about 6700 roughly points. Now when you draw a new retacement from 2500 to 9100 you will see that at 0.38% of correction comes near 6400.
Similar study i have done during the fall in 2020 and the recovery phase. Hope this could make you understand about the levels.
Note: The levels are not perfect numbers but near abouts.
StockWhizzer
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Xcellent, could u also elaborate 1.6 theory further & how did u get 9180. Also, what r the chances of hittin 15800/16k in current uptrend till April? cheers.
pratiktech
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@StockWhizzer, I have mentioned about the calculations in details just above. Pls check. Sir, From 15400 to 15800 is just 2 % of the difference and its negligible so can't comment on that small variation when you are looking at broader market levels.