22 December 2010

Nifty : 5 day pattern matching [12/22/2010]

I have tried to seek information from history using past Nifty data. Wanted to post something on it but never had enough material to talk about. Looks like I got something after todays Nifty's close! I have attempted to match last 5 day closing pattern with previous closings and if there was any match (we can hardly expect exact match) I check what happened the following 5 days.

So what I have done is rounded each days closing to the nearest percentage and then searched for similar 5 day pattern. So after today's closing of 0%, I get a sequence of -1,1,0,1 & 0 for the last 5 days. And when I looked back I got 7 instances when Nifty closed in a similar pattern. And to see what happened the next 5 days in all the instances check the table below.

As you can see, the next 5 days have been very lethargic, especially when you consider Nifty to be a higher beta market. We get 2 instances of no net movement in next 5 days, 3 instances of 1% movement, 1 of 3% and 1 of 4% movement. Clearly looks like this type of pattern is generally found during consolidation period.

Also see that there is not a single day when the movement was beyond 1%. When you include the 5 preceding days we get 10 days during which Nifty has not moved more than 1%, which for me is pretty astonishing!

What I can conclude by looking at this data, is that we may be in for some more consolidation, lets see if this kind of analysis helps getting any idea as to what future beholds.


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