Bear haunts again!: Hitendra Vasudeo
Once again, the bear threat haunts the market. Let us see how the bulls can hold on to the support of 18954.
January 10, 2011 / 08:10 IST
Technical Analyst, Hitendra Vasudeo:
Last week, the Sensex opened at 20621.61 attained a high at 20664.80 and fell to a low of 19629.81 and finally closed the week at 19691.81 with a net fall of 817 point on a week-to-week basis. Our expectation last week was that the higher range of 20659-21108-21206 will be tested but the Sensex faltered at 20659 by making a high of 20664 and slipped on a sustained basis last week.The Sensex had formed a big Enguling Bear candlestick pattern after testing the 78.6% retracement of the fall from 21108 to 18954. A likely situation of an important lower top against the peak of 21108 and the same will get confirmed if the support of 18954 is violated on a weekly closing basis. If that happens, then expect the damaging Wave c of Wave Y to show its effect. Signs of the damaging fall have already been witnessed last week but we need to wait for the confirmation of the same. But the Engulfing Bear candlestick pattern at least indicates that no long position henceforth should be taken and the priority is to exit long positions on a rise to weekly resistance levels. Since an Engulfing Bear candlestick pattern is there on the weekly chart, there could be a tendency for a minor pullback to get inside the weekly negative candle to 50% of the body at least. The weekly centre point could be tested, which will be at 19995.Weekly resistance will be at 19995-20361-20665. Only an equally sharp breakout and close above 20665 can save the Sensex from testing 18954. A trend line support is visible taken from 15960 and 18954. The low of last week is on the same trend line. If the trend line manages to offer support, then resistance of 19995-20361 could be tested. Another point which favours the small minor intra-week pullback before a further slide is the Sentiment Index. In our daily report, we generate Daily Sentiment Index for the market. The Sentiment Index has hit 0.99% which is the lowest on the daily chart since last one month. Last time, we had a Sentiment Index 0.66% was in the first week of December 2010 from where the Sensex took off from 19074 to 20664. Allowing the benefit of doubt for the same conceptual logic, we could find a short-lived recovery to 19995-20361 before surrendering the gains. Alternatively, a gap down fall to violate 18954 and close below it could be seen. Broadly, till 20665 is not crossed, the Sensex has the strong possibility to test 18954 and violate the same to meet the 200 day average, which is at 18636. The 50-day average has been violated strongly on Friday with a deeper negative candle. The 50-day average is now placed at 20045, which coincides with the weekly resistance range of 19995-20361. Expect a minor rise to the resistance on the back of the trend line support and the Sentiment Index at lowest as 0.99%. Exactly, on 3 & 4 January 2011, the Sentiment Index was 64% which indicated higher spirit on Sentiment Index, which is generally short-lived and offers a good opportunity for profit-booking and to exit long position.On the daily chart, the projection of Wave (c) of Wave Y can be at least 19336 if it is a failure, if it shows a normal relation then it can test 18513 and if it shows elongated flat, then it can extend down to 17180.The Broad MarketBSE Small Cap index must cross 10,000 and not fall below 8617. BSE Mid Cap index must cross 7981 and not violate 7176.Breakout and close above the resistance of 10,000 for BSE Small Cap and 7981 for BSE Small Cap can save the slide. Acceleration on downside can be seen below the support of 8617 and 7981 respectively for BSE Small Cap and BSE Mid Cap respectively.ConclusionOnce again, the bear threat haunts the market. Let us see how the bulls can hold on to the support of 18954.Strategy for the weekThe sharp reversal leaves no choice but to exit long to resistances of 19995-20361-20665 as the opportunity arises. Traders can sell on rise to 19995-20361 with a stop loss of 20665 and sell further on fall below 18900 with the high of the week as the stop loss as the point of breakdown for targets of 18513-17180. Traders selling at higher range of 19955 or above could look for dip towards 19336-18954 to cover and then re-enter long on breakout and close above 20665. In that case, the correction that we experienced was just a part continuation pattern of the overall rising leg. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
