A MAJOR TOP

I WARNED here that a major top is in place. all readers are advised to go through my work taking time and act accordingly in taking trading decisions in future.

SENSEX MOVEMENT FOR THE WEEK ENDED 12^TH NOVEMBER 2010.

OPEN :       HIGH :            LOW :             CLOSE :         PREV. CLOSE:  CHANGE :   CHANGE IN %

21042       21075.70       20108.40        20156.9       21005                 -849                    - 4.00%

TRENDS :

SHORT TERM : down

INTERMEIDIATE : up with caution (will turn down below 19840 )

LONG TERM : up

The week ended 12^th November started on a very quiet note in first 3 days the movement looked to be corrective accumulation after the big move we had seen from 5937 to 6350 around it was a massive 400+ points rally in nifty stocks like sbi and tata motors lead the rally.

But then on a detailed study of nifty futures intraday charts on 10^th of November we found a probable trend reversal pattern called A DIAMOND we mentioned about it in our 11^th November TECHNICAL VIEW and suggested clearly to trade on the breakout side.

THE DIAMOND  proved to be strong reversal pattern and the bear force initiated with that pattern on 15 minutes intraday chart got very very strong momentum on the downside and converted the whole week end candle in to a bearish engulfing candle reversal pattern in both nifty and sensex.

The selling was so relentless on 11^th and 12^th November that the gaps area which were created on nifty chart in the recent upmove which should normally work as strong supports just did not work and infact last two upside gaps now becomes exhaustion gaps  this is one clear indication that we may have seen an important top on the muhurrat day that is on 5^th November 2010.

WHICH SENSEX LEVEL CAN DECIDE TREND FOR MEDIUM TERM FUTURE  ?

A few weeks back when we presented our  SHORT TERM bearish view on markets when  NIFTY was around 6240 we had projected targets of 5924 and than 5700 one MUST understand that 5700 was possible only if 5924 was breached after our presentation NIFTY went down by more than 300 points it touched 5937 intraday and bounced back sharply after that move we recommended 6166 as short term buying trigger once it was crossed we did see a strong 200 points rally on the upside.

For the coming weeks 5961/5924 are the medium term trend decider levels for  NIFTY WE NEED 3 close below 5961/5924 and preferably a weekly close below 5924 will turn the intermediate term to down.

SENSEX point if view 19847/19770 are two levels which will decide trend for the next 3-4 weeks as shown in SENSEX chart here there is a BROADENING pattern development on daily charts, so the support line MUST be broken decisively and NOT to be recovered too soon for a larger corrective on the downside to open and as we are presenting in this detailed TECHNICAL VIEW there are enough TECHNICAL evidences that we may have seen a STRONG MAJOR TOP but market is a super power so if all these bearish indications fails to convert in to a larger correction i will be swift and quick enough to find possible upside move if any.

WHAT i SAID EARLIER ABOUT THIS BULL RUN ?

On October 10^th in a detailed article i said that the top of this massive bull run can be nearby and we compared FTSE  index with SENSEX on quarterly charts and argued about a possible bigger down move is due in SENSEX.

Two other important points i discussed were these

11)     first week of November will an 89^TH WEEK of the entire rally started  from march -2009. 89 being a fibonacci no. it will be an important juncture in doing time analysis.

2)     Fibo. Retracements is an all important  technical tool used to find out supports /resistance levels.if we assume that looking at the present mood of the markets and money flow from the FIIS, IT IS ENTIRELY POSSIBLE THAT we may see 21200 level of sensex in coming days.if that happens and if we  calculate future fibbo retracements levels taking 21200 as the new high, one can see that the ONE YEAR LONG CHANNE L  , HIGH  and LOW ,BOTH becomes support  levels and also the big gap (after election 2009) area becomes one important fibbo retracement support level.

So ,concluding this article ,we can presume that one important top is nearby.

SENSEX  made a high of 21108 exactly in the first week of November 2010 on 05/11/2010. And more interestingly have fallen by more than 4.5% or 1000 points in just 5 trading sessions

CANDLESTICK REVERSAL PATTERNS AND OUR TYPICAL OBSERVATION AT MAJOR TURNING POINTS.

As candlestick reversal patterns are well known tools most of the technical analysts use for predicting turning points of all trends we too use them extensively in our day to day analysis of stocks and indices in the early 1990s when these patterns were introduced by steve nisson to the world it was observed that candlestick reversal patterns were very very effective in a sense that the prevailing trend was used to get reversed very quickly after a pattern gets developed.

Over the years with spread of the knowledge about various candlestick patterns their immediate effectiveness has reduced BUT our typical observation is that now after a formation of one pattern within a few periods another pattern forms and than the trend reverses.

Interestingly this has happened on weekly charts SENSEX-NIFTY.

At the end of week on 22^nd October we presented NIFTY chart and said that there is a candlestick reversal pattern on weekly charts called A DYNAMITE next week nifty went down and made a low of 5937 which was near our one support/target 5924 mentioned before we did see a massive bull rally in the dipawali week where in SENSEX hit 21108 which was also very much near to my projected target of 21200 but the week ended 12^th November markets crashed and SENSEX LOST 4.6% off the recent high and NIFTY lost nearly 4.3% thus the weeks move got converted in to another extremely bearish candlestick reversal pattern called BEARISH ENGULFING ideally the implication of this pattern is to sell on every rise with a closing base stoploss above the high of the last bearish candle which is 6336 for nifty.

A typical example of this observation is shown in this quarterly chart of state bank of india  when it made a major bottom in 2008-09.

If the bearishness started from the last week of November gathers momentum breaking some important levels and any rise that comes from oversold areas remains weak and proves corrective only than important targets for SENSEX would be 18000 around and for NIFTY 5700 around.