I feel markets are headed down in the shorter term. And here's why.
1. Ascending Triangle 1 - Markets had formed an ascending triangle from June to September and eventually broke out from it to rally to new intermediate highs. During this formation, the momentum and strength of the market was extremely strong (refer to Momentum indicator and the RSI). However, when the market broke out of the triangle, the momentum and strength of the market weakened as compared to the July-August levels. Market made a new high and there was evidence of divergence visible.
2. Ascending Triangle 2 - Markets have agained formed an ascending triangle between November and December and have broken out from it yesterday. However, there are quite number of things to be noted here. Firstly, the momentum and strength of the market is now weakest when compared to July - August and ascending triangle 1. The divergence has now extended from Mid August to present. Secondly, historically it is quite known that triangles have a 50-50 chance of succeeding and failing. It is also very rare that two triangles have been formed back to back with no failures in between. The odds of two successive triangles giving valid signals is very rare. Lastly, look at the breakout carefully. Triangle one broke out with NIFTY notching up 2.2% gain on that day. Whereas triangle 2 breakout has been accompanied with double DOJI and a probable EVENING STAR (Major reversal pattern, have marked it with a circle).
3. Price Projections - If you take the bottom B and project the price upwards, then the current level falls exactly between the 50 -61.8% retracement. Today the markets rejected this level and fell down to 5282. The probability of price projections have to be weighed in with the uncertainties ahead (interest rates, budget, global market correction, quarterly results).
4. Cyclic Analysis - If you take the two major top's Z and B, then the current time frame lies exactly in between 50 -61.8% retracement cycle. Which means even time wise we are due for a correction. Again all the uncertainties mentioned above should be factored in.
5. Trendline - If you visualize a trend line from point A to C, then the chances of trendline being broken looks good if the markets start to correct. I have purposely not drawn the trend line as I did not want to clutter the charts with too much information.
It is indeed very rare when Price patterns, Price projections, Cyclic analysis and the surrounding uncertainties fail together. If they indeed do, then that's the beauty of STOCK MARKET guys.
Tc.
1. Ascending Triangle 1 - Markets had formed an ascending triangle from June to September and eventually broke out from it to rally to new intermediate highs. During this formation, the momentum and strength of the market was extremely strong (refer to Momentum indicator and the RSI). However, when the market broke out of the triangle, the momentum and strength of the market weakened as compared to the July-August levels. Market made a new high and there was evidence of divergence visible.
2. Ascending Triangle 2 - Markets have agained formed an ascending triangle between November and December and have broken out from it yesterday. However, there are quite number of things to be noted here. Firstly, the momentum and strength of the market is now weakest when compared to July - August and ascending triangle 1. The divergence has now extended from Mid August to present. Secondly, historically it is quite known that triangles have a 50-50 chance of succeeding and failing. It is also very rare that two triangles have been formed back to back with no failures in between. The odds of two successive triangles giving valid signals is very rare. Lastly, look at the breakout carefully. Triangle one broke out with NIFTY notching up 2.2% gain on that day. Whereas triangle 2 breakout has been accompanied with double DOJI and a probable EVENING STAR (Major reversal pattern, have marked it with a circle).
3. Price Projections - If you take the bottom B and project the price upwards, then the current level falls exactly between the 50 -61.8% retracement. Today the markets rejected this level and fell down to 5282. The probability of price projections have to be weighed in with the uncertainties ahead (interest rates, budget, global market correction, quarterly results).
4. Cyclic Analysis - If you take the two major top's Z and B, then the current time frame lies exactly in between 50 -61.8% retracement cycle. Which means even time wise we are due for a correction. Again all the uncertainties mentioned above should be factored in.
5. Trendline - If you visualize a trend line from point A to C, then the chances of trendline being broken looks good if the markets start to correct. I have purposely not drawn the trend line as I did not want to clutter the charts with too much information.
It is indeed very rare when Price patterns, Price projections, Cyclic analysis and the surrounding uncertainties fail together. If they indeed do, then that's the beauty of STOCK MARKET guys.
Tc.
