Tuesday, June 22, 2010

BEARS TRAPPED YET AGAIN! But Negative Divergence with Rupee and falling weekly momentum continues!!!

Sensex Weekly Momentum

INR - Sensex Divergence

We were expecting Sensex to pause near 76.4% retracement levels i.e. around 17500 but the rally continued
This is for the 3rd time that Bears have been trapped on the wrong side of the trend. This exactly explains why MONEY and RISK management are equally important along with Technical / Fundamental analysis
Avoid Stop loss and the EMOTIONAL IMBALANCE will be much more than the FINANCIAL IMBALANCE
Please beware the future direction of the Markets are only probabilistic and it can become increasingly difficult to predict when Mr. Market is not moving in any clear trend
Still good amount of money could have been made in the down move in MAY as Sensex moved exactly as we were anticipating only to give away a part of profit in the current rally as it should have triggered your stop loss levels a week before, thereby locking reasonable amount of net profit
Sensex is almost at the previous top around 18000 now
This warrants us to adopt the alternative scenario we mentioned earlier that wave 5 is still in progress
There are couple of ways in which the sub-divisions of ongoing wave 5 can be labeled, one of acceptable wave count is as shown
The reason for me to still believe that the intermediate top is near is the weekly RSI divergence and divergence of Sensex with INR
Sensex is near the previous top but USDINR has still retraced only 61.8% of its gain from the bottom of 44.30. This along with waning weekly momentum suggests we are in wave 5 and top should be in place soon if not yet!
A move below 17100 levels will provide negative confirmation. Wait for that level to be taken out and this time it will probably be the BULLS that will run for cover!!!
Caution: Please do not try to pick up a top, It cannot be predicted even after month long divergences unless it has occurred.

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