Selloff continues!

Sensex


Sensex is exhibiting very weak structure
One of the probable counts show 1-2, 1-2 formation. If this count is valid prices shall now move down very fast in next couple of days
The other plausible count is that 5th wave of A is extended
Either which ways the intermediate trend is clearly down and very shallow pullbacks suggest very weak internal structure
As we said in our previous blog, Metals are going to be worse performers - BSEMetal index has moved down substantially since then. If market cracks from here expect drastic move down in this space
If price reverses from here and rallies, 16500 should offer excellent opportunity for shorting!

Tide has Turned! Probable Path...

Sensex

Happened: As we said in our previous blog "Peak is here" since then market has capitulated
The best sector now to go short - is the "METALS". BSE Metal index gave best returns in the entire bull run from March 09 till Dec 09. This is the sector which should again outperform market but on the downside
Dollar index (DXY) has started the third leg of rally and this is the best period for going short on Commodities
We expect prices to reach our first target of 15500 - a 23.6% retracement of entire rally, also a Fibonacci value which Sensex has given lot of respect on previous occasions
Time cycles suggest some significant bounce back in last week of Feb - early March
Wave counts on 30 min chart do suggest a small upward correction soon but as I have always said the best strategy during such strong trends is to use Trailing stop loss method, as wave counts can be tricky and can move in extensions
Expect volatility to be very high and please be aware you might get whipsawed and stop loss might get triggered even if you are placed in right direction of trend. After that when market starts going in your direction again possibility is you will end up making a wrong impulsive trade. These are the times when emotions are high and markets enjoy testing it. In this probability game you will be rewarded only if you follow the rules and adhere to it. Bottom-line: "Avoid impulsive trades, Do not reinitiate trades without thorough analysis again after Stop Loss being triggered"

Negative bias on Sensex but minor positive on Hindalco!

Sensex


Sensex has followed exactly the paths that we have shown (blue line) since last few weeks
Prices today decisively closed below the trendline connecting March lows
This can be a start of a bigger correction as wave count also looks complete
A move below 16600 will confirm that we are in for a major correction atleast till our target zone (as shown)
One can initiate a short positions now with a stop loss at wave (5 ) high, Risk reward ratio looks quite appealing!
Hindalco

We are expecting a final wave Z up in Hindalco
We have already completed 5 waves of wave Z and I expect this to be a 7 wave move
A small minor retracement was expected which happened today and now a final up thrust near 150 levels is where this entire rally since March shall end
Copper & Gold has also given an upward breakout out of triangle. So the final rally shall end soon in commodities now
Hindalco is a stock within Sensex and we have negative view for Sensex but minor positive view for Hindalco
We sometimes have to look stock movements independently irrespective of its correlation or Beta with index
After all Beta is also not a perfect measurement of risk as we need to consider times when deviations happen in either direction and it is just an average of large sample which gives us 1 single value
Also main reason for tracking Hindalco so closely is -- lately it is acting as a good proxy for tracking commodities: metals and this is the space which we expect to lead the fall globally !