The headline might look complicated with many advanced studies of technical analysis combined together but at times when market is moving in complex patterns it is necessary to take a step forward and understand these techniques. Nifty and Sensex moved down by nearly 2% so far in today’s trading session which might be now logically attributed to the cracking Shanghai – Chinese index and Greek debt crisis. However, it cannot be mere coincidence that the reversal in Nifty has happened exactly near the channel resistance, post 49 days of topping Time cycle and expected Neo wave pattern outcome. Irrespective of the news these techniques warned about the maturity of recent up move…

Now look at the below chart to see what I mean by the above technical tools:

Nifty daily chart:

Over past few days we have been mentioning the following in our daily research report “The Financial Waves short term update” –

China stock index - Shanghai Composite has been in news given very sharp down move in last week which indicates that an important short term top for few months is formed in that market. However, over long run the rise before this fall in Shanghai composite has been impulsive in nature which suggest that the long term trend for China is on upside and we are witnessing only a correction to the up move from 2000 to 5200 levels. We are not looking a bust of a bubble but just a rhythmic correction of the impulsive rise which is part of any economic cycle. However, over short term the correction can spread across to the neighboring countries as well.

As shown in daily chart, after witnessing the 8 days of up move from 7940 to 8420, prices are consolidating from last 3 trading sessions. The current zone is intersection of two channels along with 200 days Moving average with 49 days Time cycle. This is an inflexion point and a decisive break below 8250 will reverse the trend back towards sub ………… mark.

Given the series of resistances at current levels and failure of prices to cross above 8470 so far indicates that the up move is in matured stage and one should not be surprised to see reversal from this key area.

In short, there can be a Gap down opening today which will happen from the 49 days Time cycle along with series of channel intersection that we have been highlighting over past few days. A sustainable Gap down move will resume downtrend towards sub …….. levels! Such Gapping action is the reason why we have stayed cautious during the current uptrend which is without any accumulation or base formation. The euphoria that many have been talking about for move above 9500++ levels will now subside equally fast!

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