Sensex at crucial juncture! Is this the start of next BULL TREND?

Bottom Line: Sensex again reached near the previous highs of 20700 made in September 2013. It is on the verge of long term trend changing level!!!

Indian markets have been moving up amidst all the negative news that has come out over past 2 months. The monthly chart clearly reflects this movement. A simple bar technique shows that prices have so far made higher highs and higher lows which is the basics of technical analysis and yet the most powerful technique to determine the direction of the trend.

In today’s morning research report “The Financial Waves Short term update” we have shown 4 different time frame charts – Monthly, Daily, 60 mins, 10 mins to determine the trend right from long term to medium term to short term and explained how at times it is imperative to see all the degrees whether you are an intraday trader or long term investor.

Here in this article we are showing just 1 chart of major index with wave counts purposely removed that are shown in actual report.

Sensex Monthly chart:

Wave Analysis:

In previous update we mentioned that, “Existing position should trail stop towards 5950 levels and if Nifty has a Gap up opening the same should be trailed towards 5980. In short, we continue to be…... A move above ……………. will form higher highs and higher lows even on the daily degree and Sensex will again be on the verge of an upside breakout!”

We have been bullish on Nifty as soon as it took out 5650 level. In 11^th September 2013 research we mentioned “We have seen a Gap up move as soon as this correction got complete and not only Nifty many of the stocks have shown inverse Head & Shoulder reversal pattern at the bottom. First target for this pattern is near 5850 – 5900 levels.”

Even on 4^th October 2013 we mentioned that “On one higher degree, the move up from 5400 to 6150 took approximately 10 days and so far prices have already consumed 9 days and has retraced only 50% of this up move. This concept suggests the medium term up trend that started from 5400 is still intact and a move above ………. will form a classical higher high and higher low formation even on daily scale.”

In today’s morning research before market opened we published the above shown monthly chart along with detailed explanation on daily, 60 mins and 10 mins degree.

Rotational rally:The strength we saw in Friday’s trading was led by Banking, IT and Capital Goods sector whereas high beta sectors took a break. This pattern again fitted very well with the overall ongoing rotational rally concept.

Sensex - Price to Earnings and Price to Book ratio:

Figure 2

From fundamental perspective, Price to Book ratio has arrived near 2003 levels and Price to Earnings ratio is also at the level of 2005. So by using these 2 simple parameters we are not seeing the current market as expensive for now but rather cheap on valuation. There is lot of other parameters apart from these 2 that goes for fundamental justification… The above chart is picked up from “The Financial Waves Monthly update”.

Conclusion: …….. we want our readers to be unbiased and look at this objectively rather than acting subconsciously and not accepting the probability of a possible ……… formation as well. We do not have preference of one scenario over other but we are close to getting that confirmation.Sensex has arrived very close to confirming the start of next BULL TREND but let us wait for the mentioned important level to be broken on upside for confirmation!

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