To calculate the minimum price objective, calculate the "height" of the formation at its widest part - the "base" of the triangle. The height is equally determined by projecting a vertical line from the first point of contact with the trendline on the left of the chart to the next point of contact with the opposite trendline. In other words, measure from the highest high point on one trendline to the lowest low point on the opposite trendline. Both these points will be located on the far left of the formation. Next, locate the "apex" of the triangle (the point where the trendlines converge). Take the result of the measurement of the height of the triangle and add it to the price marked by the apex of the triangle if an upside breakout occurs and subtract it from the apex price if the triangle experiences a downside breakout.
For example, working with a descending triangle , in case of IDFC highest high is 140 and the lowest low occurs at 188. The height of the pattern is (140 - 88 = 56). The apex of the descending triangle also occurs at 140. The pattern experiences a downside breakout. This means the pattern has a target price of 36 (88 - 56 = 120).
Traders and Investory Psycology - With its "flat-bottomed" shape, the descending triangle indicates that sellers are more aggressive than buyers. The pattern typically emerges when buyers feel that the stock is overvalued and decide that the fair value is at a specific lower level. These buyers are prepared to purchase the stock if it hits that specific price level. The floor does not hold because demand wanes - possibly buyers have run out of money or interest in the stock. Once the downside breakout occurs, the stock price continues to fall.
Our Bureau
Chennai, Oct. 6 The Monday bear haemorrhage pushed as many as 225 stocks to hit their new lows on the BSE.
Prominent stocks among them include some of the A-group stocks such as MTNL, Indian Hotels, Deccan Chronicle, Suzlon Energy, Shree Renuka Sugars, GVK Power, Parsvanath Developers, Indiabull Realestate, DLF and HDIL. The other stocks that touched their new lows were Kotak Sensex, an exchange traded fund from Kotak Mutual Fund, ICRA – rating agency — and Edelweiss Capital.
The new lows' list was dominated by realty counters.
FIIs have been selling quite heavily from the market, particularly in the last two days, as the credit woes spread to European markets. After pulling out Rs 1,662 crore-worth equities on Friday, the FIIs (net) sold Rs 1,169 crore in Monday's trade, according to the provisional data available with the stock exchanges.
Circuit summary also captured the bear grip with 449 stocks hitting lower circuit, against 55 stocks that touched upper circuit filter.
Of the 2,677 traded, only 281 or 10.5 per cent ended in the green in the BSE while 2,369 stocks ended in the red; 27 stocks remained unchanged
1.U.S.Markets:-
2.Asian markets :-
3. Nifty is expected to trade ..........
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There is positive divergences in Daily, Hourly, 5-Minute charts. Only Minute & Hourly have closed above emas confirming a positive divergence .However, daily confirmation will come on a close above 3750 for tomorrow. Choppy movements likely to continue, trade accordingly..Larger trend remains down with hourly trend attempting a reversal at the last hour..
As long as 3500 holds, then the Nifty moves may be expected as in the chart below.Any sharp fall may change the picture.
The two intraday charts above of speed line/pitchfork till 11.30 am.. they are from the start of this downwave ie 4304..& are self explanatory..we are at supports here..if these do not hold then the next supports are deeper down..take ur trading calls as per ur risk appetite..cheers.Elliot Wave Analysis
8 Year Feared Bearish cycle
A much bigger cycle is the 8-year cycle. As shown on the chart below, '1984 was the beginning of 8-year long bull-run till '1992.
The next two important turning points occurred exactly 8 years thereafter, in '1992 and '2000. Both these turning points were marked by stock market scams, wherein the leaders of the rally had extremely difficult time later. For example, ACC, the leading stock of '1992 bull market, remained below its highs till end of '2004. Similarly, the IT stocks, which were leaders of '2000 rally, had lost as much as 90% of their top valuations by the year '2003.This year, we are sitting on this very important cycle, which therefore, may throw up similar possibilities.
In 1992 cycle completed the bear phase in 12-16 months, while the ‘2000 cycle took 19 months only to hit the low, which was then followed by 19 months of base formation before bull phase could begin again. Sensex may, therefore, test sub-10000 levels, which will be 55 to 58% cut from its top value of 21206. Time-wise, such a phase would last for at least 13 months (beginning Jan’08), and may require consolidation thereafter, before the next bull phase can begin.
Base Cause for Correction
The important hallmark of this bear market has been heavy withdrawal by FIIs. The following monthly chart of FII Net Investments shows a clear break of the 14-year long Monthly channel.
The FIIs withdrawing from equity market has resulted in Dollar outflows from India, reducing domestic supply of the currency for local importers. As a result, since ‘Jan highs, while Dollar appreciated by 20%, the FII net Investment had also reduced by about 20%.
Elliot Wave Chart Analysis
In the charts we have found that “c” is 61.8% of “a”, as marked on the Daily chart below.The larger “c” has now dropped to test 12500 levels. Considering Friday’s Sensex ends at 12526, Sensex’s Daily Close chart maintains Lower Top Lower Bottom formation. 12526 was also the lowest close of the year ‘2008.
Respecting 50% correction level I marked at 13183, Sensex is now down a hefty 731 points or 5.5% in less than two trading sessions.
As for wave-structure, Irregular C-Failure Flat (post-12558) is an extremely bearish assumption to make, which can potentially take the Sensex below 10K levels within just 9-10 trading sessions.
This projection is nothing but 161.8% ratio on its “b” leg projected from end of “c”. As per rules, this should be achieved within the total time of the Flat, which was 9 days.
To avoid such extremely bearish consequences, Index must find a way to configure differently once it is closer to 12K. While the wave structure indicates bearishness, we can watch out if new lows attract value buying.
Such value-buying, remember, can emerge as a result of Sensex now trading at 50% correction level to the previous bull market from 2904 to 21206.
Prior to this bear current rally, “x” completed at a “failure” point of 17054. The “a” of second corrective completed at a low of 12514, exactly within our targeted downside between 12316 and 12671.
The bear market rally post-12514 would be the “b” leg of the second corrective, which I said, can occur despite the fact that the market remains open for a protracted bear phase as per the 8-year cycle.
As per the Wave logic, corrective phases should consume more time than the wave getting corrected. Corrective phase consuming lesser time is allowed only in Triangle / Terminal / Diametric, which are exceptions to virtually all rules. In our case, it would indicate 2nd corrective (post-17054) developing as an Extracting Triangle or Diametric.
From the channel perspective, the upper limits for the bear market rally can be seen closer to the upper end of Purple channels, which I have been showing on the Weekly chart below. The lower channel is currently at about 11500.
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