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Nifty
3947.20 (+130)
Sensex 13111.85
(+536)
Markets
are facing Dual Correction
In
the 2nd half of 2007, markets have undergone an
abnormal excessive uptrend, which was not gradual .The
uptrend was sudden and rapid. Market moved more than 50% in
just 4-6 months. As far as technical analysis is concerned,
the smooth movement of the market continues when it moves in
a proper channel, which is shown above. So the Excessive
movement happened outside the channel(shown in red arrow
line) was corrected in the First phase of correction(shown
by green line) and after market reached its normal high
after the first correction which was at around 5228 , second
phase correction started which can be anywhere between 30 %
to 40 % from its normal top 5228 .
Both the
levels can not be ruled out as the current fundamentals are
Also supporting the downtrend, this is the most vital
negative factor.
Current Down Trend
Now
analyzing the current downtrend. As shown in the picture
below, this downtrend is moving in a channel where market
bounces where ever it meets the lower channel line. Every
meeting results into an attempt of coming out of the
downtrend. We can only get confirmation of end of the
downtrend, when it breaks out from upper channel line.
Today's up move can get extended till 4150-4200 levels.
Now it’s
very difficult to know where the market would touch the
lower channel line. More the time taken in going down,
deeper the lower channel line goes. So
if sharp correction continues
it would touch the lower channel soon, may be near
3500-3600,
but if the small bounces or
range bound movements takes
longer durations, it can further extend the
correction till 3100-3200
range.
This
figures match the length of usual correction.3600 is
at around 30% from recent high 5228 and 3100
is at around 40 %. One more historical fact collides
with this figure is : Last bear market rallies in early 1990
and 2000 took around 60-80 weeks with around 50% correction
from its top. S0 50 % corrections from the January top
around 6200-6300 levels comes to 3100-3200 levels.
So we
conclude our Technical Levels with 2 ranges, one is our
earlier range of 3600-3700 given in our 1 July report .If
markets goes below first range, 2nd range is
3100-3200 range, which we call the maximum downside
possibility.
Trend reversal
point
is 4280-4340 range.
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