INDI 25 IN­DEX – WARN­ING SIGNS

Finweek English Edition - - Companies & Markets -

Trend: Short term down. Medium term tech­ni­cally up. Long term up.

Strat­egy: Sell short the bounces. The Indi 25 in­dex made a new all-time high in early Au­gust. It’s formed a large broad­en­ing for­ma­tion (lines 1 and 2), which I be­lieve is a top­ping pat­tern (rather than a con­tin­u­a­tion pat­tern). The weekly RSI (on top) is giv­ing two neg­a­tive di­ver­gences, one of which is par­tic­u­larly large. Both are warn­ing of a large correction to come. Traders sell short large-cap in­dus­trial stocks/or Sa­trixInd on a bounce back to 23 100 on this in­dex. (At the time of writ­ing the in­dex was at 22 650.) In­vestors re­duce long-term hold­ings. Look for a drop to its 50-week mov­ing av­er­age (21 550) ini­tially, but there­after to line 1 sup­port (20 480). If line 1 gets bro­ken (very likely), it will set up a min­i­mum down­side tar­get of 17 880 ie the height of pat­tern 1-2 pro­jected down. Keep your stop-loss for short­ing as a weekly clos­ing price above line 2 (23 650).

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