as i wrote on 24th august,that next two weeks are crucial for the markets,if the downtrend is not arrested we may see a crash upto july lows...markets behaved as suspected ( not expected !!)..the news of nsg waiver for india could only make a lower top on the daily charts,and the week- end closing completed the lower top-lower bottom bottom formation,,despite good IIP numbers,,,followed by possible one of the worst news on usa financial crisis...lehmen gone...merryl taken-over and aig in deep trouble...played is roll in taking the indices very much near to the july lows..but having seen some strong value buying at lower levels..a question arises as usual whats next ??...here i am trying to explain a few possibilities..
1} the most optimistic possibility is that the indian markets may have tasted the july lows by remaing a little higher..nifty at around 3900...against 3790...and sensex at 13000 against 12500...in both indices and on both GAAPED DOWN days indices have succeded in taking supports at around 78.6% of the rise..{an imp fib level}...and infact on both days closed above this levels.now, there is a visible h&s topping pattern on both indices ..targets of which have been achieved..but the neckline of the h&S will prove tobe resistance for the next up move..at around 4280 and 14300 levels in nifty and sensex..using fibonacci tool we can resitance levels at 14316..{50 % of the entire fall} and 14332 {38.2% of the recent fall } for sensex...4284 and 4313..for nifty so , in my opinion as the resistance levels meet from three angles at around 14300 and 4300..we should first see these levels...remember as usual markets bottom out in unusual fundamental situations and india markets have clearly shown their strenth against its asian peers..compare the charts of hanseng with sensex and the picture will be very much clear...if the firts possibilty really turns out to be a reality,, we will than have to check what happens at the resistance levels..if we have hit the deck than naturally after giving some reaction indices will continue the upward journey.
2}a little bit otimistic possibilty is that indices will get resisted at the above mentioned resistance levels,and come back to the july lows..but their rally from yesterdays lows to around 4300 and 14300 will give a boost to the important indicators and they will generate a buy call creating positive divergances when indices hit the july lows{ breaking yesterdays lows}...thus creating fair chances of strong double bottom formation in indices,,,remember that july lows are the strong support levels...
3} the more pessimistic scenerio will be that indices will not even cross the 14000 and 4200 levels and fall back sharply to continue the lower top- lower bottom formations nad touch the last major supports at 11907 and 3610 levels..looking at the movement in certain heavy weight stocks ,like sbi ,bhel, larsen, ntpc...and most importantly looking at the monthly chart structure of reliance industries i DO NOT SEE our indices going below 11907 and 3610 in any circumstances..
also ,with this writing i am presenting a chart of nifty-1 minute ,a few days back..which seems as a copy of the longer term sensex chart..and i do favour a consolidation in indices around these levels i.e. betn. 12000-17000 for may be 2-3 years before breaking upwards..and as i have written on my blog about the advance mooves that reliance capital takes,, ahead of nifty..i am presenting an hourly chart of reliance capital and nifty as on yesterday ..it s clear that capital broke the monday high at the hour ended at 3:00 pm..and nifty will break the same level today morning..showing again that capital leads..and a weekly chart of capital is showing an inverted h&S pattern..if that completes ,who knows we may really have hit a bottom !!!!!!!Wednesday, ...bjn.
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