Daryl Guppy sees Sensex support at 12200-12380

Excerpts from CNBC-TV18's exclusive interview with Daryl Guppy: 

Q: What are you seeing on the charts of the Nifty now after its recent damage? 

A: I would be careful with Nifty. It’s a dead cat bounce. We have an immediate support level around 3,600 for the Nifty. Where we are sitting at the moment is not the support level, we are still moving down. This rally is a downtrend. The first support is at around 3,600.  If 3,600 falls then the downside target is sitting at around 2,900.      

Q: What is the more likely scenario from here for the Nifty? How would you map it from here?

A: From here I would still he looking at downside pressure, if 3,600 can’t hold then we would be entering into a strong bear market. To some extent, markets are being led by what is happening in the US at the moment. The US is completely a head and shoulders pattern. How it develops out of that pattern and develops or rebounds is important and that is what will provide guidance both for the Nifty and Sensex.  

Q: What are the levels for the Sensex now?

A: For Sensex we are looking at support developing in a support band that extends between 12,200 to 12,380, we are not at that level at this stage, we are in the middle of that point and so we are still on this decline moving towards that trading band.  

If 12,200 can’t hold then the downside target is sitting around 10,000 and these are quite bearish targets.  

Q: This morning the part of the relief is because of crude – it has cooled down to USD 138 per barrel. How are you mapping crude from hereon? 

A: Crude is in a long-term parabolic trend. Parabolic trend is an accelerating trend. We are not yet breaking that parabolic trend; we need to move down to USD 137 per barrel for that to happen. If we move below USD 137 per barrel to the right-hand side of the parabolic trend line, there may be a downside target of around USD 126 per barrel. However this in only temporary trading in the strong uptrend pressure that is currently existing. On a severe fall in oil, we will be looking perhaps at USD 120-115 per barrel. But this is more likely to be a temporary trade finding support -around USD 137 per barrel for a rebound continuation back towards USD 148 per barrel as a target. 

Q: So you are saying even if crude cools down to USD 126 per barrel ,you would only see that as a retracement in a bull market?

A: There is retracement in the bull market at this stage. The primary factor in crude is going to be regulatory changes within the US systems that would prevent investment speculation in the futures markets but at this point of time on technical basis is USD 126 per barrel is the support levels. A move below USD 137 per barrel can see a very rapid fall towards USD 126 per barrel because this is the characteristic of parabolic trend.
 
Q: What kind of range do you see the Dow or the S&P stuck in right now after its recent fall?

A: The Dow has reached the downside targets defined by the head and shoulder pattern. Head and shoulder pattern is based on weekly charts; you have the head developing of October 2007, the right hand shoulder developing in December 2007, and the downside target for that is 1,100 that also intersects with a long-term uptrend line around that level as well.
 
So there is a trading band support between 10,700 to 11,200 and what we expect to see the market to pull down and find support around 10,700 and develop is W-shape recovery. That means we get a rebound to take place then a retreat comes back and retest 10,700 and then perhaps it develops a new uptrend. If you look at Nasdaq; you will find that Nasdaq is already further advanced into type of recovery pattern.