Last time I said, "Despite Index hitting our target of 20000, where I've said profit-booking would be the most sensible thing to do, Index is yet to show a major weakness. Strength would, therefore, continue ... until we see more than two bear candles on the chart."
It has been my observation for a while that strong rallies do not create more than two bear candles. As a corollary, one may also say that a third bear candle would indicate weakness in the rally.
Each of the Daily candles during the week gone by was a Bear Candle. Therefore, at least a short-term top is confirmed at our target level of 20000. I had advised last week that "Having reached the target level ... it may be better to live by the day." Sensex has already lost 1500 points in eight trading sessions so far.
While Sensex lost over 5% during the week, BSE Small-Cap and Mid-Cap Indexes finished flat, powered by individual performances in the broader market.
With its low at 18737 during the Moorat session, Index has corrected about 50% of its previous 6-day rally from 17171 to 20238. With only 50% loss in more number of trading sessions, the time-price ratio still remains positive.
We'll, therefore, watch if the Index finds support close to 50% or 61.8% correction levels, which are at 18700 and 18340, respectively. Levels lower than these would put the bulls in danger. On the other hand, bulls may charge, as they have been, if any of these correction levels are held above.
By: Vivek Patil, India's foremost expert in Elliot Wave Analysis
Source: ICICIDIRECT.COM
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