Tuesday, August 10, 2010

Wave5 continues as anticipated…

As anticipated, Sensex found support and did not move below the level we labeled as wave (ii) of v of final wave 5
Given the weakness in the structure and failure to rally sharply even after the breakout that everyone is talking about I think we are going to develop into a Diagonal triangle pattern
The path for the Diagonal triangle is as shown
This last leg of rally has been successful in turning maximum of the remaining bears into bulls
The euphoria has picked up in the media as well and everyone is talking about the breakout but just to see prices still struggling and not moving up in a strong trend
This is just going to eat up on emotional and psychological aspect of the trader without paying much for the efforts put in
A completion of this pattern shall therefore lead to a steep decline as very short term traders starts squaring off their long positions in frustration of slow moving trend
We will update you if any variation to this pattern is developing, till then high risk traders can go long but only with a strict stop loss and also keeping an action plan ready in case of a large gap down opening!

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