DRAMA - WILL IT REPEAT THE SHOW ONCE AGAIN? BUT THIS TIME ON HIGHER TIME FRAME

On 16 Jan we have posted a post on blog labeled “WILL IT REPEAT THE SHOW?”  Please see this link if u has not seen (http://www.kolhapuritrader.blogspot.com/2012/01/will-it-repeat-show.html ).

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 -----

In post posted on 18/12/11 see link (http://www.kolhapuritrader.blogspot.com/2011/12/bear-attack.html) it has been mentioned that---

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.