Delayed post
Sensex (13635):
Intermediate trend: Sideways:
Since 1st week of July we anticipated a corrective rally in the markets, provided the Sensex doesn’t break 12.8-12.6k on the downside. On the upside the targets were placed at 14.5k or even 15.3k for the pull back rally, refer to review dated 1July 08, while explaining “Head and Shoulder” bearish pattern.
As anticipated, the Sensex rallied from 12575 to 15130 within flat 6 days and touched 15130; but almost kissed the neckline of the Head and Shoulder pattern before turning ‘red’ once again (See Weekly Chart). ‘Smart money’ bought stocks near 12.8-13k levels; while “street” bought the same almost at 14.6k & above, albeit in euphoria; on 23rd July, the mood on the street was as if there is no tomorrow to buy the stocks. The subsequent fall was obvious after such ‘emotional’ buying by the “weaker hands”. Technically, the rally halted exactly at 50% retracement level (15127) of the entire fall from 17735-12575. Further, the bulls were caught in a bad situation with formation of a potently “island” reversal bearish pattern (See daily chart).
The sharp rebound from 12.6k levels indicates a waning interest of the bears, at least in the medium term; but this island reversal pattern that too at 50% correction levels (typical bear market phenomena) has once again raised serious doubt about sustainability of the rally. Expect fierce battle between bulls (strong defense at 13-13.5k) & bears (gap area of island reversal i.e.14608-14484) in the next few days or even in weeks. Position your trades accordingly.
