In the Last weekly report from 12th-16th Dec I had clearly mentioned about the ‘Head & Shoulder’ pattern and also mentioned about the slide inside the downward sloping channel. I had suggested keeping a close eye on 4841-4919. On 12th Dec the high for nifty was 4915 and on the last day of the week 16th Dec the high was 4840.
On the daily charts the trend-line bottom comes near 4531 which can be seen as a support. However the weekly charts are suggesting that it has closed below the important trend-line support of 4841 and it has also managed to close below 4675 which was the low of 2010. This produces the scary picture of filling the gap and retesting 3723.
Probable up move is likely but any probable up move would be a weak bounce. Earlier we had formed a double bottom pattern on daily charts at 4640 levels in 2 sessions which is a powerful pattern for reversal. So keep a close eye on 4640-4769. A few more close below 4675 we can see unexpected levels.
The sharp fall on Friday has dropped the Sensex to the lowest weekly close near the previous double bottom of 15478. Now the question is how much pain left? Will the fall stop near the lower edge of the downward sloping channel? Only a single indicator is showing positivity. All other indicators remain on the bearish side so the answer should be NO.
The RSI is continuing its fall below 50%. The MACD has slipped below the signal line in the negative territory. The slow stochastic is below its 50% level and has started sliding. The ROC is negative and below its 10 week MA but it is also showing some positive divergence.
The Nifty daily chart is showing positive divergence. The RSI is still below 50% level at 34. The MACD is negative and below its signal line. The ROC is also negative dropping below its 10 day MA. The slow stochastic has entered into the oversold zone.
Conclusion: The Sensex and Nifty continue to fall within the downward sloping channels. I still would suggest preserving your cash.
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