On January 8, 2008, almost two years ago, the Nifty peaked at its all time high of 6,357. After that,the trend reversed into a short,very deep bear market.OnOctober27, 2008, the Nifty hit a three-year low of 2,252. From peak to bottom, the index lost 65 per cent.
The six months between October 2008-March 2009 saw consolidation followed by rangetrading
between 2,500-2,900. Since March 2009, there’s been a big turnaround. The Nifty
has surged past the 5,000-mark, with positive background indicators. Volumes have
jumped and the ratio of advances-declines has improved.
It is clear the major trend is bullish. That has a few implications. One is that the market
should continue to see a pattern of rising tops and bottoms while the major trend stays up.
A second is that this uptrend should eventually result in the January 2008 highs being
overtaken.
Right now, the chart pattern of the Nifty is quite easy to interpret. The market has been
forming an inverted head and shoulders (H&S) pattern between May 2008 and now. The
neckline of this bullish 19-month formation is between 5,200-5,400, which is why there
is a great deal of resistance just above current trading levels.
As and when the market clears the resistances and moves above the neckline on higher volumes, there will be a sharp upmove to a projected target of 6,000-6,200. There is very
little resistance between 5,400-6,100 because the market moved extremely fast in that
zone in early 2008. So there will be an accelerated uptrend on any breakout past 5,400 If the major trend remains bullish this will be the normal outcome. There is a fair chance
that this will occur in calendar 2010. Normally, Indian bull markets last longer than nine
months. So we would expect net gains in 2010.
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...Charts can be just one of the many indicators but not a confirmed data...
