It’s a Bear hug!

Money Times - - Trading On Technicals -

Last week, the Sen­sex opened at 36274.25, made a high at 36616.64 and fell to a low of 34202.21 be­fore it closed the week at 34376.98 and thereby reg­is­tered a fall of 1,850 points on a week-to-week ba­sis (a fall of 5.1%).

Daily Chart

Last week, we saw a break­down be­low 35800 which re­sulted in a slide to 34202. The Sen­sex tested the sup­port level of 34302 be­fore it closed at 34376.

The huge sin­gle day fall wit­nessed on Thurs­day and Fri­day dented the mar­ket for a deeper fall. The Sen­sex may slide to­wards 32483. The fall was cat­a­strophic hint­ing at a bear mar­ket.

The rise from 22494 in March 2016 to 38989 in Au­gust 2018 was ter­mi­nated in 5 waves with a fast and fu­ri­ous fall, which vi­o­lated the trend line and chan­nel. The trend line and chan­nel is shown in the graph pub­lished over the last few weeks. The same chart shows the break­down on the bar chart. Re­trace­ments of the rise from 22494 to 38989 are placed at 32565, 30680 and 28716. Ex­pect 32565 to be tested as it co­in­cides with the swing bot­tom of 32484 (March 2018).

Weekly Chart

The break­down is vis­i­ble on the chart lead­ing to re­sis­tance at higher lev­els. A pull­back, if any, from the cur­rent level of 34376 or above will cre­ate lower tops that will be time con­sum­ing con­form­ing to b-struc­ture. Re­sis­tance will be at 35065-35928. The lower range for the week can be 33513-31099.

Monthly Chart

Septem­ber 2018 ended with a bear­ish can­dle and a lower high and lower low for an im­por­tant swing top. Oc­to­ber 2018 is re­spond­ing to the bear call and crush­ing the bull. The Sen­sex is likely to test the Monthly Re­ver­sal Value (MRV) of 33004.

Quar­terly Chart

The July-Septem­ber 2018 quar­ter is over and the Sen­sex dis­plays an in­verted ham­mer, which sug­gests that the up­side may be locked for the near-to-short-term and puts pres­sure on sup­port clus­ters.

The quar­terly can­dle saw a fol­low-up slide in the first few days of the new quar­ter, which opened the bear mar­ket call. The quar­ter has just be­gun and it could hit the lower level first be­fore mak­ing any strong moves of re­ver­sal. The bear mar­ket cor­rec­tion had a time­line of 9-12 months, 9-15 months and 18-38 months. The long­est time-wise cor­rec­tion was from 1992 to 2003 but this may not hap­pen now as the typ­i­cal char­ac­ter­is­tic of such a phase is po­lit­i­cal in­sta­bil­ity which does not ex­ist cur­rently.

The Sen­sex peaked in Au­gust 2018, which means the cor­rec­tion could get into May 2019. 2019 is the elec­tion year and his­tor­i­cally an elec­tion year tends to make ma­jor bot­toms for the long-term. Cor­rec­tions of such mag­ni­tude are from 25%, 38% and 55%, which can cre­ate a sig­nif­i­cant dam­age. There­fore, the Sen­sex hav­ing bro­ken the 35000 mark will have to make a quick re­cov­ery to safe­guard it­self from the bears. The bears seems to be in com­plete con­trol and trad­ing short po­si­tion stop loss of in­tra-day are strength­en­ing the con­fi­dence of the bears. A re­cov­ery from 33000 can still re­pair the dam­age if the Sen­sex moves above 35000 soon. But as of now, the bears have taken con­trol.

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