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Sensex Technical Analysis - Jan 5th






The Sensex is showing some good signs or considering the street sentiment a sign of hope.

There are few things that give hope, here are they:

1. The capitulation seems to have been completed at around 7900. The latest moves are likely to be more rangebound and the low is perhaps completed.

2. Though not a big fan of elliot in trying to look ahead, the five wave pattern (probably C or E) has been completed at lows of 8300. This would imply a good levels going ahead

3. Perhaps the most bullish sign right now is the appreance of rounding bottom like pattern. I am circumspect of this truning out to be a true rounding bottom i.e. I do not expect the thrust to be similar to the actual rounding bottoms. The pattern is violated because of a gap and thrust, which in my interpretation violates the rounding bottom in short term charts. The upper break in these cases do not yeild the same amount of returns otherwise an unviolated pattern would yeild.

4. It is porbable the seeds for a big rally are being sowed and are at its earliest stages

The pitfalls of these assumptions are the half made triangle that is still in development. The retracement of 61% is ideal in case of contracting triangle. The triangle is more likely than a rounding bottom. The significance of rounding bottom is just this - the accumulation has started to happen. This is significant. Make sure you watch the reaction to the break of stop loss of this bottom. If the reaction is very sharp, they we are probably going break below the triangle levels and turn it into more an expanding bias.

Happy Trading.
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