International Conference on Sustainable Growth through Universal Practices in Science,

Technology and Management (ICSGUPSTM-2018), Goa, June 8-10, 2018

Application of Gann Cycles: A Test on Indian Stock Market

Sameer V. Deshpande1, Dr. Praveen M. Kulkarni2, Mokhalles M. Mehdi3

1 Assistant Professor, School of Commerce and Management, Sanjay Ghodawat University, Kolhapur, Maharashtra, India ;
[email protected]
2 Professor, Head of Management Department, VTU, “Jnana Ganga”, Udyambag, Belagavi 590008. Karnataka, India;

[email protected]
3 Assistant Professor of Marketing, MIS & IT, School of Business, Assam Kaziranga University, Jorhat, Assam, India;

[email protected]
ABSTRACT:
W.D Gann researched and concluded that, stock prices do not move at random. They have a price cycle and time
cycle, it means history of price and time repeats. He revealed big movement in prices starts in certain months while
some months do have small moves. And some months do not have any turn around in prices, they just continue
preceding trend. This paper focuses on price cycle not on time cycle. In this research, stocks under Index Nifty were
analyzed and found that they also follow Gann Cycle. This helps in prediction to a common investor and trader. Stock
price movement can be to up or to down side. The direction of move-up or down cannot be predicted, but big move is
coming soon this can be predicted with high probability. And this is price cycle.

KEYWORDS: W. D. Gann, Cycles, Price Moves, Prediction.

INTRODUCTION
Legendary trader on wall-street William Dilbert Gann who not only earned money but also wrote many books on this
secretive knowledge of trading. One of the technique is “Gann Cycle”, named after him. According to Merriam-
Webster‟s online dictionary, definition of cycle is “an interval of time during which a sequence of recurring succession
of events or phenomena is complete.” William Dilbert Gann (June 6, 1878 - June 18, 1955) had surprised the world
but predicting in well advance, the Great Crash on work of W. D. Gann is under research not much research has
been done. It is still secret. Only a New York Stock Exchange and World-War-II also.
The few people know, how to apply it. Gann in his book “Forecasting Grains by Time Cycle” indicated that the great
time cycles are most important because they record the period of extreme high or low prices. The cycles are 90
years, 82 to 84 years, 60 years, 45 years and 20 years.
Gann wrote so much about technical analysis and proposed Gann Cycles, which are the pivot points for beginning on
new trend. Gann was one of the most successful trader in equity and commodity. He developed his own style of
technical analysis using price and time. He also used astrology and numerology. He predicted prices in advance,
very accurately. His books mention his work but still not well understood by the world. He said Price and Time
Vibrates, means repeat in cycles.
Every stock chart of last ten or thirteen years is enough for analysis. The extreme high and low prices repeatedly
occur in certain months and they tend to repeat again in future. This helps in prediction. These cycles are different for
different stocks.
Technical analyst, Himma Reddy, in her book “The trading Methodologies of W. D. Gann: A guide to build your
technical analysis toolbox”, gave an example of „GOOGLE‟ stock chart and, it followed Gann cycle. Major moves
started in month of March. April, December never showed any big move they just continued previous trend.
Identifying beginning of the trend is always not easy many indicators are tagging it, while Gann Cycle shows easy
way to spot the beginning of the trend. This article will test Gann Cycles on latest stocks chart on National Stock
Exchange‟s leading Index which is called Nifty, it contains diversified stocks.
METHODOLOGY
Checking the simple bar charts for last ten-fifteen years on monthly chart. It can be seen by observation that a
particular stock has a tendency to start big moves in certain months. For Example: Google, Inc., from year 2004 to
2011, it can be seen, March has five major turnaround in prices, then, January, July, August and November while, No
turn happened in April, May, September, they had continuation of the trend in preceding months. It is different for
every Stock.

216 | ICSGUPSTMAE047 DOI : 10.18231/2454-9150.2018.0244 © 2018, IJREAM All Rights Reserved.

 International Conference on Sustainable Growth through Universal Practices in Science,

Technology and Management (ICSGUPSTM-2018), Goa, June 8-10, 2018

In this research, an attempt to cover twenty four stock plus Nifty Index, that makes sample size 25 out of fifty-two
prices in Nifty Index. The sample companies are diversified. On all twenty five charts Gann cycle was seen and they
were tradable.
ANALYSIS AND FINDINGS
Every stock has different months in which big price moves started (see Table 1). Some of the months had absolutely
no big move started in history of last eight years. Implied volatility is less just before starting the big move. Once
move starts it goes up.

Table 1: Occurrence of Big Moves in History of last Ten Years

Name of Big Move started in following month

stock
Yes bank January, 2012 & 2013, 2014, 2015, 2016, 2017 & September 2012 & 2013, 2014, 2016.

Nifty (Index January, 2012 to 2017 & September, 2012 to 2017. Small moves started in the month of
itself) March, 2011, 2012, 2014, 2015, 2015, 2016.
ACC January, 2011 to 2017 and March, 2011 to 2017. January to March is one trend or cycle
then March to next January is new cycle seen.
Asian Paints March, 2011 to 2015 and 2017. Every March prices move, they mark new beginning or end
of the trend
Auropharma March, 2013 to 2017 marks new beginning of trend
Axis Bank March, 2011 to 2017 .They show start or end of cycle or trend.

Bajaj Auto January, 2011 to 2017, and the same trend or cycle seems broken in March. March started
new trend sometimes mostly opposite to January
BPCL January, 2012 to 2017 and month of May had some time reversed the trend

Dr. Reddy June & July, 2011 to 2017, price movement direction was set.
GAIL June, 2012 to 2017 being very decisive month.
Heromotoco September & March. From 2011 to 2017 Cycle runs March to September with one trend
and opposite trend from next September to March
Hindalco March & April, 2011 to 2017. March & April being very close, they were trend setter of future

Indusind bank May, June & July, 2012 to 2017. These three months, trend took pause and then went
ahead or reversed
Kotak bank January & March, 2012 to 2017
Lupin April & February. February gives rise to new trend, rarely April give rise

Maruti Suzuki April, 2012 to 2017 lasted till December of every year
ONGC March & June. June, 2012 to 2017 had started new move
Reliance April & July, 2012 to 2017. Trend revered after April and June, every year
Sunpharma June 2012 to 2017

Tatamotors January & February, 2012 to 2017. Big moves are either in January or February
Tata MTR DVR January & August, 2012 to 2017. But cycle is not clearly visible, a bit difficult.

Tatapower January,2012 to 2017, except in 2015

217 | ICSGUPSTMAE047 DOI : 10.18231/2454-9150.2018.0244 © 2018, IJREAM All Rights Reserved.

 International Conference on Sustainable Growth through Universal Practices in Science,
Technology and Management (ICSGUPSTM-2018), Goa, June 8-10, 2018

Tatasteel January & August, 2011 to 2017. August terminates the preceding trend and started new
VEDL August, 2011 to 2017
Infratel September
Source: Study results of Nifty Index and 25 sampled stocks in it.
Table 2: Analysis of Nifty Index and its stocks
Name Total Sample size Gann Cycle worked % success rate of
of Index number of of stocks taken for in following number of Gann Cycle worked in
studied stocks in it study stocks sample is
Nifty 52 25 25 100%
Source: Study Results of Table 1
Based on Table 1 and Table 2, Index „Nifty 50‟ is diversified and it‟s sample of 25 stocks out of 52, revealed
interesting facts that all stocks in sample of 25, followed Gann Time Cycle. Although, it was different for every stock.
Similarities are found, most stocks in sample have January, March, September months are part of Gann Cycle, either
beginning or end of trend. The success rate of its application is 100%.
MANAGERIAL IMPLICATIONS
A trader can take straddle i.e. buying both PUT & CALL or taking delta neutral position by one future contract in one
direction and two options in opposite direction to cover risk. But this entry is to be taken before beginning of big
move, when implied volatility is less therefore, option premium is less. After move has started, implied volatility goes
up and also option premium rises. Once stock prices are moved to certain level, profitable position is to be settled.
Trend will reverse as it cannot continue in a same direction for long, then previously unsettled and non-profitable
option can be settled. Profit is earned in both directions. Options are brought before premium start rising, because
they were brought before beginning of big move on monthly chart.

CONCLUSION AND FUTURE IMPLICATION

Gann Time Cycle is applicable to „Nifty 50‟ Stocks. It is simple to understand. Traders and Investor can take
aggressive position in cycle months like January, March, and September or can be different month applicable as per
Gann Cycle. They can avoid certain months where no big move in prices is seen like month of May, October,
November and December. This prediction technique is worth fortune to a common investor or retail trader.
However, the same technique can be applied to commodities and other Indices like Bank Nifty and its stocks
PharmaNifty and its stocks.
In future, this can be traded, using derivatives like options and futures. Buying strangles means buying one PUT and
buying one CALL in beginning of cycle may give profit.

For few stocks Gann Price Cycle is not very clear to spot, it needs analysis or to change time frame like TATA MTR
DVR. Cycle is there but just hard to spot. One can avoid trading in it. However, adding volume and Relative strength
index will be future research scope.
It is surprising that a particular stock has a tendency to start big or small moves in particular months. This has been
repeated in last many years. It is consistent. And can be traded as a risk disclaimer, this is an academic research;
investor or trader should take advice from professional financial advisor. Details in this research are not investment
or trading advice. The authors of this paper are not responsible any trading loss or profit to any one trading any
financial instrument.
REFERENCES
1. Reddy, H. “The Trading Methodologies of W.D. Gann: A Guide to Build Your Technical Analysis
Toolbox”.(2013), pp.155-157.
2. Stocks. (n.d.). Retrieved September 2, 2017, from Chartink.com: http://chartink.com/stocks/niftsy.html

218 | ICSGUPSTMAE047 DOI : 10.18231/2454-9150.2018.0244 © 2018, IJREAM All Rights Reserved.