At the start
of year 2011 there may be very few people who are seeing possibility of down
trend in Indian stock market, but year 2011 ended with almost 25% correction in
major indices and many stocks hammered by more than 50%.
Now the year
2012 started with lot of noise with downside possibility and nifty may go down
to 4400, 4000 and even we may see much lower levels. Obviously nobody is ready
to put money in stock market in anticipation that getting stocks at much more
lower levels. But market always moves against mass psychology so that it will
create psychological pain to maximum people. Now nifty is up 9.18% from Dec.11
closing value. So let’s try to find out what is next possibility?
In stock
market lot of patterns as well as numbers is important and which keeps
repeating. U should be able to identify these patterns / numbers which may be
possible by learning, learning and learning.
Just see the
interesting thing happening right now in Indian stock market. Because of which
once again the question (WILL IT REPEAT THE SHOW?) is coming to our mind. And looks like this
time if it repeats it will repeat in longer time frame ( months to years ) and
not for 1-2 days.
All charts
are of NIFTY.
CHART 1
Chart 2
Chart 3
Chart 4
As shown in
chart 1 NIFTY started down move from week ending on 11/1/08 and completed it in
42 weeks i.e. week ending on 31/10/08. After that as shown in chart 3 it
consolidated for 22 weeks (from week ending on 24/10/08 to week ending on
27/3/09)actually it consolidated for 21 weeks ( exactly half of the 42 weeks )
and started up move since 22’nd week.
NOTE: -
Consolidation means sideways movement during which smart players ( read
institutional investors ) are accumulating or distributing stocks slowly, in
this case it is accumulation.
Now see what
happened next -----
CHART 5:
22 WEEK
ONWARD THE INDIAN STOCK MARKET RALLIED AS SHOWN IN ABOVE CHART.
Now look
chart 2 the ongoing down move started from week ending on 12/11/10 which may
have completed in 42 weeks i.e. week ending on 26/8/11. After that as shown in
CHART 4 it started consolidation from week ending on 2/9/11 which may have
completed last week exactly after 21 weeks i.e. week ended on 20/1/12. And
from this week onwards (week ending on 27/1/12) it
may start its upward journey. FOR THIS COMING FRIDAY NIFTY SHOULD CLOSE ABOVE 5100.
That means
for last 21 weeks nifty (Indian stock market) consolidated after falling for 42
weeks and now this week (22’nd week) if it closes above 5100 there is high
probability (80%) that it will once again repeat the story as shown in chart 5.
ONE MORE
REASONS WHY THIS WILL HAPPEN -----
Today there is
breakdown from head and shoulder pattern on hourly chart, target for this will
be 4400 ( cmp 4700), word of caution there is major support @ 4639 if this is
taken out on daily closing basis then there will be free fall up to 4400.
Now for this down
move various supports (according to down trending channel mentioned elsewhere
on this blog, long term trend line, monthly S1 according to monthly pivot
points, 50% Fibonacci retracement of whole rally from march 2009)
comes in 4400-4450 range and also target for this head and shoulder pattern
comes 4400, so it looks like nifty will fall up to 4400-4450 region.
The Chart patterns are suggesting that this fall will
be fast, may be in next week only
BUT THIS IS FAILED AND IN STOCK MARKET FAILED PATTERNS GIVE
STRONG MOVES IN OPPOSITE DIRECTION.
THERE ARE
SOME INDICATIONS WHICH ARE SUGGESTING POSSIBILITY OF DOWNSIDE ALSO, LIKE---
1)
On daily chart
stochastic indicator is in overbought zone, RSI indicator is approaching
overbought zone, which may trigger correction.
2)
On weekly chart
RSI indicator is approaching its resistance.
3)
On last Friday
NIFTY taken resistance at 61.8% Fibonacci retracement of entire fall from 5400
to 4531. In technical analysis 61.8% level is known as golden ratio, at which
turnaround happens.
4)
INDIA VIX is near
its support level, it may happen that VIX
starts upward move it means NIFTY will start its downward journey.
5)
Few of large cap
stocks are near their resistance levels.
THAT MEANS LOT OF TUSSLE IS GOING
BETWEEN BULLS AND BEARS RIGHT NOW, WHO WILL WIN WE WILL COME TO KNOW IN FUTURE
ONLY.
In short NIFTY is at very critical
level, there is possibility of both upward as well as downward possibility.
Next Friday if it closes above 5100,
the next hurdle for its up move will be the downward trending line as shown in
chart 6 and 200 SMA on daily time frame as shown in chart 7 below.
CHART 6
Right now the downward trending line
is approximately at 5140 level.
CHART 7
Right now the 200 SMA is
approximately at 5220 level.
So once if it closes above 5150 – 5250 zone there
is 90-95% possibility that nobody can stop Indian stock market entering into
new bull market.
One more interesting observation is
that in May 2009 election results boosted Indian market sentiment which was
lacking at that time, come March 2012 and state election results may boost
market sentiment once again which is lacking right now, who knows.
DISCLAIMER: This
Blog is meant for sharing my trading ideas only and no calls to be
taken as trading recommendation. Visitors please do your own
research or consult your advisers for safe trading.
