Wait for more signals before becoming positive
Therefore, instantaneous assemblies will be interpreted as corrective in nature until the medium-term technical parameters are positive. The recent rise of the Sensex from below 12514 points was very sharp. The reverse interval of July 23, 2008 created a bullish ল্যান্ড Island Reversal Gap��� between 14510 pts and 14519 pts on the daily chart.
In general, its impact on the medium-term outlook will be very positive, especially since the island consists of 22 trading sessions. When a stock indicates an uptrend, trading above the interval that occurs, then the interval returns and trading below the initial price, an island is overturned.
However, the Sensex has since moved into a strong resistance zone between 15026 points and 15390 points. The monthly mid-point of June 2008 is 15026 points. Fall 50% retracement level from the May 2008 high (17735 points) to 15124 points. Below the Sensex’s daily 14104 points (closed on July 22, 2008) the positive effect of the bullish ‘Island Reversal Gap’ will be denied. The Sensex is then expected to have an initial fall of 13,513 points, a 61.8% Fibonacci retracement level of the recent rise from 12,514 points to 15,130 points.
If the bearish island reversal gap of 14484-14568 points is immediately filled and the Sensex manages to finally correct the resistance between 15130 pts and 15390 pts, the ongoing uptrend will continue. The Sensex could then test higher levels between 16618 points and 16860 points.
The 78.6% Fibonacci retracement level of the fall from the peak of May 2008 is 16618 points whereas 16860 points is the 50% retracement level of the highest fall of January 2008. So, one would wait for further confirmation before being positive in the medium term outlook.
(Author VP of Darashway Technical Research)
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