The diametric pattern is a very common pattern that we observe more often on the charts. A Diametric is a seven-legged corrective pattern and is labeled as A-B-C-D-E-F-G. Important characteristic of a diametric pattern is that wave E tends towards equality with wave C in terms of price and/or time, wave F tends towards equality with wave B and wave G tends towards equality with wave A.
In simple terms, it can be a contracting triangle connecting an expanding triangle or an expanding triangle connected with a contracting triangle pattern.
The Fibonacci extensions show how far the next price wave could move following a pullback. It is also used to derive multiple target levels on either direction. Common Fibonacci extension levels are 61.8%, 76.4%, 100%, 161.8%, 200%, and 261.8%.
Look at the chart of Dr. Reddy on 60 minutes time frame and see how prices have moved in sync with the Fin extension levels.
Below is the chart with detailed analysis:
Dr. Reddy 60 mins chart:
On the hourly chart, prices are moving within the last leg wave g of Diametric pattern. Wave g can go towards 61.8% to 100% of wave a. We can see prices have already extended to nearly 76.4% of wave a. Now it would be important to see if prices mark a halt near the low of 2350 or move further lower.
Important support is placed near 2350 and resistance is placed near 2600.
The above analysis clearly shows how well Elliott and Neo wave patterns work when clubbed with advanced techniques like Fibonacci retracement or extension for predicting the further move.
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