Island Reversal on Sensex

There is an island reveral on Sensex.

An island reversal means that current trend is over.

Hence, the recovery starting from 16th march may be under threat.

However, the pennant boundry and the gap on 20th march may act as supports.

It'll be wiser to wait for Sensex to go below 12300 before shorting the index.

For short-term trading, if market goes below 28th march's low, shorting can be done with SL at the new Gap and target at the gap on 20th march as well as the lower boundry of pennant.

IT Sector- Impact of Re Appreciation

Industry Major and Index heavyweight Infosys makes a failed triangle.

The overall sentiments in IT sextor are summed up on CNX IT Chart.

NIFTY-Double Bottom

NIFTY has confirmed a double bottom on daily charts and has improved marginally over the target of failed pennant. The target of confirmed double bottom is 4050.

Earlier it had made a double bottom on Hourly charts and has achieved its target of 3865 yesterday.

Patterns- 21st March

Patterns for the Day:-

IBP - Support-Resistence Line Break

RelCapital- 1-2-3 Pattern with Trendline Break

Bharti:- Diamond- Upside Breakout.

NIFTY- Failure Pennant

NIFTY & NIFTY Futures are demonstrating the failed pennant pattern like some of its heavyweight constituent.

But one needs to be careful, Sensex has still to give a breakout from similar pattern. However, if sensex closes above yesterday's high today, it will confirm the breakout.

Further, resistence may be expected around 13000 level being both a psychological level as well as values of 20DMA & 20EMA.

A couple of Longs in Indecisive Markets

Failure Patterns in Reliance and Jetairways

Caution:

-Be religious with your stop-losses.

Symmetrical Triangle Vs. Pennant

The differentiators are:

1. Shape: A pennant may also look like a wedge in addition to a triangle like appearance.

2. Pivot formations: IN a symmetrical triangle, atleast two minor pivotal lows and two minor pivotal highs are required. A pennant can form even by convergence of straight lines matching the highs and lows of intervening bars irrespective of the factor whether the bars made pivotal highs/lows are not.

3. Duration: There is a consensus among writers that triangles forming with 3 weeks are pennants and those taking more time are symmetrical triangles.

4. Volume Charateristic: In a pennant, activity must fall to unusually low levels and keep on falling during formation phase. Though falling volume is also an essential ingredient of a symmetrical triangle, a symmetrical triangle may have high volume on days when it's making pivots.

NIFTY/Sensex-- Is it a pennant?

If we just check the price action, the answer is a big yes with support coming from similar pattern in a number of frontline stocks like Reliance, Infosys, M&M, LT, etc. Some people may argue about triangles vs. pennants but then duration of pattern may provide the answer. But IMHO none of the these two patterns should be accepted as valid.

Fall in activity level is the first and formost criteria for a pennant/flag to be successfu. High or zig-zag volume during the pattern formation of such kinds may even cause reversal of trend. If we look at the NIFTY Futures volume, we can see that instead of decrease in activity, volume has gone up.

So the question is how do we trade if Nifty continues its downward journey. The answer lies in Fibonicci Extensions.

For charts click here.

Confirmed Double Bottom--NIFTY Hourly

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Descending Triangle - GESHIP

Shorting Candidates-05th Mar

Revised target for IFCI--Rs. 18 (07th March)
Please read the targets on RCOM as 335-330-325.

IDFC-Roof

Dabur-Channel

Bharat Electronics Ltd. - Double Top & Pullback