Market Outlook- 15th March 2010
Time & Price retracements hang overhead
By Hitendra Vasudeo
Last week, the Sensex opened at 17034.92 attained a low at 17027.92 and moved up to a high of 17215.07 before it finally closed the week at 17167.96 and thereby showed a net rise of 173 points on a week-to-week basis.
Support will be at 17027-16994. On a fall and close below 16994, we could see a situation of a near term top and a lower top formation against the earlier peak of 17790.
Our Wave Y is under progress.
Sensex Wave Analysis
Count I -
Wave I - 2594 to 3758 ↑
Wave II - 3758 to 2904 ↓
Wave III - 2904 to 12671 ↑
Internals are as follows:
Wave 1 - 2904 to 6249 ↑
Wave 2 - 6249 to 4227 ↓
Wave 3 - 4227 to 12671 ↑
Wave IV - 12671 to 8799 ↓
Wave V - 8799 to 21206 ↑
Wave W-X-Y structure has developed
Wave W - 21206 to 8047 ↓
Wave X - 8047 to 17790 ↑
Wave Y- 17790 to 15651 ↓ (current ongoing move)
Internals of Wave Y can be a flat or a further complex correction from 21206 would have to be worked out.
Wave A from 17790 to 15651
Wave B from 15651 to 17244 (current ongoing move)
Since Wave B has moved above 61.8% retracement level, Wave Y to turn into zig-zag is now ruled out. Wave Y likely to be a flat. Now it is to be seen if Wave Y will be a normal flat or an irregular flat. If it is a normal flat, then Wave B should end anywhere from the current level to 17790.
Wave A was of 23 trading days and Wave B has the 23rd day on Monday, 15 March 2010. The 78.6% retracement level is placed at 17332. Time analysis indicates that the preceding trend, which was the rise from 15651 till date could halt and the retracement required for Wave B flat pattern for price confirmation is at 17332. This week will play a crucial role in deciding if we are likely to be at a near term top or we could see the continuation of the rise that began from 15651 for a 100% retracement of Wave A or 127% retracement of Wave A for an irregular flat. On breakout and close above 17800, we could see Wave B of Wave Y get into an irregular flat or the internal of Wave X, which had ended at 17900, would open up again.
Wave B of Wave Y irregular flat 127% is placed at 18367 and opens up Wave X again to end at 18390.
The 78.6% of the fall from 21206 to 8047 is placed at 18390.
Support of 17027-16994 will play a crucial role as well. A fall and close below the support will indicate that a near term top is in place and a weekly close with a negative candle below the support level would certainly confirm it.
If Wave X keeps extending time to surface then as stated in last week's issue, alternate Wave X counts.
Alternate Internals of Wave X – No.1
Wave w- 8047 to 17493↑
Wave x-17493 to 15651↓
Wave y- 15651 to 17244 ↑ (current upmove)
The above structure will come into existence on rise above 17900. The rise is for Wave y of Wave X in that situation.
Alternate Internals of Wave X – No.2
Wave A-8047 to 15600 ↑
Wave B- 17493 to 13219 ↓
Wave C- 13219 to 17244↑ (current move)
Internal of Wave C
Wave i- 13219 to 17493 ↑
Wave ii- 17493 to 15641 ↓
Internal of wave ii
Wave a- 17493 to 15330 ↓
Wave b-15330 to 17790 ↑
Wave c- 17790 to 15641 ↓
Wave iii- 15641 to 17244 ↑ (current move)
If 17790 is crosse, then the minimum projection target can be 19650 and to an outer extent to 22698. This will convert Wave X into an irregular flat pattern. Wave X's relation to Wave W for irregular flat can project a target of 24443, which is 125% of Wave W.
Till the breakout and weekly close above 17800 is not witnessed with a positive candle, we are still in the situation of Wave X termination at 17790, which leaves the doors open for a slide.
The Broad Market
BSE Small Cap index has not yet crossed the resistance of 8690. If the resistance is not crossed at the end of the week on a closing basis and it slides down then we could be in a situation to test back 7926, which is the earlier support.
BSE Mid Cap has resistance at 6700-6900. A further rise and close above 6900 is required. Support would be at 6397-6276. A fall below the support level would trigger the slide.
Conclusion
As mentioned last week, a breakout and close above 17800 can only turn the Sensex bullish from hereon. Otherwise, we could see the Sensex make a near term top for a slide thereafter. A strong rise this week would break into the upper range with a positive candle.
Strategy for the week
Keep stop loss of 16900 to hold long positions.
Market Outlook- 8th March 2010
Breakout above 17800 creates a bear trap
The Sensex posted a strong positive candle and removed the sustainability issue that was hovering in our minds. A trading breakout and close above the previous week's high of 16669 was witnessed that will enable the Sensex to test the range of 17276-17790. And when the Sensex hits the higher range once again, the sustainability issue crop up.
Last week, the Sensex opened at 16438.45 and maintained the same as the low for the week. Further, it moved higher to 17097.71 and closed at 16994.49 and thereby showed a net rise of 564 points on a week-to-week basis.
Support will be at 16843-16429-16000. Resistance will be at 17276-17790.
The market reacted favourably to the Budget and the positive sentiment was visible among the investing and trading community in the post-budget week. But equally important henceforth will the low of the budget week, which is at 16167 and can be rounded off to 16100.
Trading movement and stock wise momentum was witnessed last week. The same may continue provided the supports are held well. Volatility from the resistance level cannot be ruled out.
Internals of Wave Y can be a zig-zag
Wave A from 17790 to 15651 (current move)
Internals of Wave A
Wave i- 17790 to 15651
Wave ii- 15651 to 17097 (current move)
After the termination of Wave ii, expect a slide down for Wave iii, which can be impulsive on the downside.
Wave ii termination can be at current levels as it has attained 61.8% retracement level of the fall from 177890 to 15651. The 75% and 87.5% retracement levels are placed at 17253 and 17509. Expect termination at current level or at 17253 or 17509 as per the above count structure. It will be valid till 17800 is not crossed.
Alternate Wave structures can open up if level of 17790 is crossed in the current upmove. In that case, Wave X, which we had terminated in the above count opens up once again with different internals.
Wave y- 15651 to 17097 ↑ (current upmove)
Wave C- 13219 to 17097↑ (current move)
Wave iii- 15641 to 17097 ↑ (current move)
If 17790 is crossed then the minimum projection target can be 19650 and to an outer extent to 22698. This will convert Wave X into an irregular flat pattern. Wave X relation to Wave W for irregular flat can project a target of 24443, which is 125% of Wave W.
Till the breakout and weekly close above 17800 is not witnessed with a positive candle, we are still in the situation of Wave X termination at 17790 which leaves the doors open for a slide.
BSE Small Cap did not violate the support of 7926. Therefore, support continues at 7926. Resistance is at 8690 and 9120. Resistance of 8690 will be tested. A breakout above 9120 can trigger the rally in large caps as well.
BSE Mid Cap strength was better than BSE Small Cap. The support of 6276 was not violated. Resistance will be between of 6870-7153 and a breakout above 7153 can trigger a rally.
Breakout and close above 17800 can only make the Sensex bullish from hereon and trap the bears. If the breakout and close above 17800 is not witnessed then a lower top probability is at current level or on rise to 17253 or 17509
Exit long on rise to 17253 and 17509 as the opportunity arises. Keep stop loss of 16000 to hold long positions. Add long positions on rise and close above 17800.
Market Outlook - 21st February 2010
15600-15300 is the key support zone
Last week, the Sensex opened at 16186.90 attained a low at 16011.82 and moved up to a high of 16480.89 before it finally closed the week at 16191.63 and thereby showed a net rise of 39 points on a week-to-week basis.
The pullback retracement levels mentioned last week were 16485-16705-16952. Since the high registered last week was 16480.89, the Sensex has almost tested the first retracement level and fell to a low of 16074.58. The Sensex recovered on Friday to close at 16191.63.
On weekly chart, the Sensex has created a Doji Star candlestick pattern, which suggests that if the high of the Doji Star is not crossed then we could see a slide or sideways movement below last week's high of 16480. Along with last week's high, the resistance cluster is in the range of 16480-16553. Hence, till the resistance cluster is not crossed, further pull-back cannot be expected. If the resistance of 16553 is crossed, then expect the pull-backs to test the 16705 and 16952 levels. Sustainability is always an issue in a pull-back rally.
Our view that a pull-back of the fall from 17790 to 15651.99 is in progress still holds. The retracement level of the fall from 17790 to 15651 is placed at 16485-16705-16952. The perception is that if the pull-back comes into existence, then a lower top could be formed at either of the levels of 16485-16705-16952. Subsequently, it could slide back to test 15600-15300. On violation of the range, a further slide to 13219-12272 is likely. The range of 13219-12272 is the election gap. A small intermediate support could be witnessed at 14683 on a fall towards 13219-12272.
Wave Y- 17790 to 15651 (current ongoing move)
The BSE Mid Cap index support continues to be at 6300-6275. A fall and close below 6275 can take BSE Mid Cap tumbling down. A rise and close above 6788 can bring about near term strength.
BSE Small Cap index has support at 8104-7776. A fall and close below 7775 can bring about a slide in BSE Small Cap Index. Resistance is at 8690. A breakout and close above 8700 will bring about continuation of the rise. Both BSE Mid Cap and BSE Small Cap have formed a pennant on weekly charts. A breakdown below the support level can bring about a sharp slide as we move into the Budget week. An event driven drift can bring about sharp volatility on either side.
The Sensex had a pull-back rise whereas the broad market indices had a pennant formation, which can bring about a slide if the support is violated once again.
Traders can trade long on a rise and close above 16553. Those long need to exit the same on a rise from the current level to 16500. Support at 15600-15300 is the key support zone and a fall and close below it will show a sharp downward slide. Sell on fall below 15300 with 16553 or the high of the week, whichever is higher, as the stop loss