October Bears At Play
A Much Required Step Backwards
The Sensex witnessed a corrective last week as it opened
around the mentioned resistance level of 17500 and began a
short-term downtrend that has already led to a 800-point fall. A
number of bearish triggers were generated on the technical
studies early last week and the same would continue to have
an effect on the price action in the near term. An important 4-
month long trendline support, which stood at 17000 has been
broken on a closing basis and is therefore likely to do more
damage. Immediate support is seen in the 16600-16700 zone
based on pattern and moving average studies. A break of the
same (likely) would take the index close to the trading base
level of 16000. Near term resistance seen at 17100/5100. Do
note the ongoing correction is mainly on account of the
markets being overbought after the recent run-up and also
because of seasonal factors (October Effect). It provides an
excellent buying opportunity for MT/LT investors once the Nifty
moves into the 4750-4900 zone. The fall is also a muchrequired
throwback to the large “H&S” pattern that gives us
targets beyond the highs of 2008. The US markets too look
overbought in the short-term having tested the supply zone of
10100-10200 (DJIA) last week. A short correction is likely that
would have a negative rub-off on most other world markets.
Market News & Trends
Patterns – Retracement Underway
The indices broke down from a clean upward sloping “Channel”
pattern on the daily chart last week that has been in the making
for the last couple of months. This development should lead to
a retracement of the rally from 13200-17500 and hence a move
down close to 16K would be ideal before the uptrend resumes.
IDFC – For The Good & Bad Times
The stock has been gradually moving higher in the last few
weeks and is currently trading at a 15-mongh high. Despite this
move the set-up is ripe for super normal gains. Any decline into
the 155-159 zone should be used to buy for a move to 180.
PTC – Shaping Up Well
The stock has confirmed a major medium-term breakout in the
recent past that should lead to rally towards 118 levels in the
next 2-4 weeks. Downside is capped to the 93-96 zone.
