Today's trading broke down the Short term Trendline as well as the crucial 5475 level after days of trying to trade above 5550 level and failing. Lets check out what lies ahead.
1.The updated chart of the one which was posted on weekend for trading this week. CLICK HERE
2. As mentioned in the previous post , the important supports are in the 5350 level (Lower Bollinger Band in the Daily chart) and 5250 zone ( Medium term Trendline support). Check the Trendline chart below.
3. Data from FII (and DII too!!) trading, Options and Indicators suggest further weakness.
4. The big cut that heavyweights as SBI, ONGC and RIL took in today's trade, is also not encouraging.
5. The cause of concern for the Bears now may be the VIX ,volatility index,which is not moving in their favour .
6. The Elliott wave analysis that I have been following - CLICK HERE
It Primarily shows the onset of the 5th wave (may be of the first wave of the Larger 'C'), which may target the support levels mentioned above soon (and may be further below.)
but Alternatively the 4th wave may carry on in a complex correction as shown in the chart below (Blue scenario).This will effectively mean a range bound trading between 5400 and 5600 till expiry of this series.
7. All the favourite Blogs and analysts are on the Bearish side right now (including me ), this cautions us that though the Markets are weak and may eventually breakdown to sub 5000 levels but it may hang on in this series (as per the alternate EW count above ) and catch out of money option traders and high leveraged traders, on the wrong foot. Keep this observation in your trading plan.
8. So for the precaution of a whipsaw here , we should part book the shorts at important levels and keep 5525 as SAR now . Alternatively have a trading s/l for the short positions and ride the flow down.
9. An interseting observation for the Bears - A Probabale Head and Shoulders pattern may be forming which will bring lots of 'Honey' for the Bears ahead.