Bow-Tie Diametric

Bow-Tie Diametric

What we are observing on the charts currently is classical formation of the bow-tie diametric.

All the legs of this structure have consumed approximately 20-25 candles. The measure of "a"  is 752 points, therefore if a=g happens, the current fall can be arrested near 18192, that too in 20-25 candles of which already 13 candles are consumed today. Since the larger A leg measured from 17482 to 19131 level, the 61.8% retracement calculates to 18112. Therefore we can conclude that 18100-200, is a very important support zone for the market, from where the "C" leg can open up to take the markets beyond 19131. So watch out for some wild swings in the markets in the days to come.

IS THE RALLY OVER???

The BIG question.

The last rally which started on 10-12-2010 from 19075 to 20666 on 3-1-2011 took 15 days. Now within 4 days after the top of 20666, the entire rally has been retraced by 61.8% (19680), and closed near it. A close below this level would drag the sensex to 19500 level, where it might find a some support.  A close below 19500 breaks the tren-line which got started on 31-08-2010, and is still intact.However a close below this would bring it to a major support band of 18800-19000.

Since the  oscillators are in oversold zone the sensex might make an attempt hold 19500, and retrace a bit.

The scene on the weekly chart is horrific. An engulfing bear pattern is observed on the same. The fall from 21108 to 18954 took just 3 weeks. This entire fall was retraced exactly 80% @ 20666 last week. The time taken for this retracement was 6 weeks. Therefore double the time for 80% result.

Engulfing bear pattern is observed right at the top, the week post "diwali" & also now at this top. The same pattern was observed in Bank Nifty & SBI, the results are there to be seen. The major long -term support on the charts are in the zone 18800-19000. A close below this would make the slide stronger & faster.

Conclusion:  It seems the major tops for the sensex is in place, and we might have to be ready for major correction in the market.

Direction-Less Market

It has taken 12 days for the market to completely retrace the 4 day fall of 1143 points (20217-19074).
Also we are in the zone of 61.8% retracement of the entire Nov fall. We might experience some pressure in the market around this level.
However, if it is able take out 20300 convincingly (i.e. with a 200-300 point thrust or by closing above it for 3 days) we might easily go & test the recent highs. Also it opens up chances for life-time highs in the coming weeks.
On the weekly charts we had observed an engulfing bear pattern in Nov, the week after "Muhurat Trading".
This pattern on weekly chart was observed in Jan 2008, May 2008 & Aug 2008, and we know the results thereafter.
On monthly charts we had observed a doji (Oct), followed by engulfing bear (Nov). Although it seems this month has negated the negative effect of the earlier months (**  the month is not over yet).
Overall this is a trading market only. Trade for smaller margins & remain liquid.