Let's see TEVA symbol example with the cycles analysis
Let's go over the process of using the cycles step by step.
Starting from June 28 2020.
Following a long uptrend and good news about the company.
We are at a decision point, the price will continue up or go down in the next 5 months?
There are a few cycles we analyze, these cycles provide a future projection line based on historic price analysis.
The Bi-Weekly cycle (Velvet) in this example shows a potential future downtrend for the next 5 months.
Note: the cycles provide the most probable trend direction and timing but not specific price levels.
All cycles, including the Bi-Weekly cycle also provide potential dates for CIT (Change In Trend).
These dates are marked with vertical pink lines as shown for this case in the next picture.
The Annual cycle (Green-Grey) provides a smoothed projection line.
In this case it is showing a potential downward trend before continuing up,
indicating that we should expect a low arund Mid October 2020 before the price will continue up.
The weekly cycle (Pink), adds more granular timing indications for future potential CIT. This is a 3-4 days up and 3-4 days down cycle.
Are we ready to check how was the actual price?
The price is shown by the black line.
Now we can compare it to the future projection lines.
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 one could be just buy 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.
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 sow 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:
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.
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.