TEVA USE CASE


10 Mar
10Mar

To see how this unique cycles-analysis method is used for forecasting, let's take a real example with TEVA symbol


In the following example we go over the process step by step:


Starting from June 28 2020.  

Starting point: following a long uptrend and good news about the company.

We are at a decision point, will the price continue up or go down in the next 5 months?


With the cycles analysis we can already know that this is a turning point, from here the price is changing direction to downwards. How can this happen? especially when such answer cannot be found with the technical or fundamental analysis? Let's find out with the following example.




We use a few cycles in the analysis,  these cycles provide future projection lines based on historic price analysis.  

In this example the Bi-Weekly cycle (Velvet) , is one of these,  showing a potential future downtrend for the next 5 months.

Note: these cycles provide the most probable  trend direction and timing but not specific price levels.



Timing Indications:

All cycles, including the Bi-Weekly cycle,  provide trend direction and potential dates for CIT (Change In Trend). 

These dates are manualy marked with vertical red lines as shown for this case in the next picture.


The Annual cycle (Green-Grey) provides a smoothed projection line.

In TEVA case it is showing a potential downward trend before continuing up, 

indicating that we should expect a low around Mid October 2020 before the price will continue up.



The weekly cycle (Pink), yet another cycle we use in the analysis, adds additional  granular timing indications for future potential CITs.  This is a 3-4 days cycle.



Are we ready to check how was the actual price?


 The resulted price, added after a few weeks,  is shown by the black line.

 Now we can compare it to the future projection lines generated by the algorithm.



We can see a phenomenal correlation for both timing and direction!!!


The price did go down until Mid-October. 

This is an amazing forecast!  imaging how profitable you could be just by using it.


The price was also fluctuating up and down around the downtrend, in the exact predicted timing by the Bi-Weekly cycle, in an almost up to a day accuracy. WOW!


This is a type of forecast found nowhere else,

The technical analysis could not provide such a forecast nor the fundamental or any value analysis tools.


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Let's review what additional value the weekly cycle (Pink) added to the forecast. 

As we can see, the troughs and dips were predicted in great timing accuracy by the weekly cycle, almost to the day!



For the technical traders, using this tool could be a double confirmation to the bull flag template,  providing a much earlier indication for the downward direction.


OK, we just witnessed a great example, a forecasting tool found nowhere else!


But how accurate is this tool? 

Is it the holly grail?

Well, this really a great tool but it is not the holly grail and is not a 100% solution.

The main reason is the flip (inverse) phenomena:


This tool provides two forecast dimensions: Direction and Timing.


Expected Direction Accuracy: 

From our experience, in about 90% of the cases, the direction provided by the projection lines is accurate.


The Flip Direction Phenomena and Resolution (inverted cycle):

From our experience, in about 10% of the cases, the direction provided by the projection line may be in opposite (inverse) direction. 

This is a result of the mathematical method we use called Neural-Network.


To illustrate this flip phenomena we added the Red line in the example below.  

The Red line is the opposite-direction line of the Bi-Weekly (Velvet) line.

The timing however, is still the same and provides the same best accuracy.


Note: In the case of TEVA this is obviously not a flip case.


Flip Direction Resolution:

To avoid the risk of flip cases, one should verify every potential CIT in that annual cycle, that the price direction  goes hand in hand with the projection line direction. In case of difference, switch to the flip mode by following the red line.  That verification should be run whenever the annual cycle changes direction, which is every few months.


Expected Timing Accuracy: 

The experienced typical timing accuracy: 

Weekly cycle typical timing accuracy: +/- 3 days. 

Annual cycle typical timing accuracy: +/- 2 weeks.


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Note: In the case of TEVA above this is obviously not a flip case.

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