Dead Cat Bounce Back

Hi guys I am back with a gap of 2-3 days, that too with my favorite topic charts, I mean Technical Analysis.

The topic is Dead cat bounce back. First question you may ask is What is DEAD CAT BOUNCE BACK?

Answer is very simple, and its there in the name itself. If you through a dead cat from say a multistoried building, even though cat is dead is it will bounce back. Like that, now market is also fully oversold. In October month itself lost around 30%. So there will be little bit relief in bear rally.

Second question is why I am calling it as so?

As almost everybody know what is happening in the world economy. So whatever bad news is coming from any part of the world is going to factor into the market immediately in bear run unlike bull run where bad news of big countries also may not factor into the market immediately(for example when sub prime problems broke out in US in last August or september, we had bull in full swing which didnt affect our market rally, @ that everybody started speaking DECOUPLING THEORY). Due to collapse of very big institutions starting with Lehman Brothers, Asian markets particularly Chinese & Indian markets were completely devastated. FIIs were the major sellers & domestic & retailer investors just became the mute spectators. Now due to many reasons (like bailouts, interest rate cuts, boosting packages, over-sold market conditions in/from almost every part of the world) market is facing some relief rally in bear market. But it may or may not sustain this rally! Since we still have to check out the 3rd quarter results & according to many reports & news they may be very dismal. So market may not sustain this rally.

But for the time being, for short term traders people like me market is looking +ve. Check out in the above chart, for the 1st time 20DMA is showing some +ve news in almost 4-5 months. See the marked circles where market is above 20 DMA which is very first indication. In addition to that check out the volume support this rally has. And also check out the MACD & Stochastic charts showing +ve & above 60 point indication respectively. If 10 DMA (blue line) crosses over 20 DMA (red line) & comes on top of it then it will be strong indication of a relief pullback rally.

Now question comes whether market retests the October levels? That I think I can not
predict! But check out in the marked circle & beside that where market is trying stabilize @ 9000 levels and RESISTANCE BECOMING A KIND OF SUPPORT. So in short term 9000 level will act like a SUPPORT now.

But if global & local condition gets worst, I mean goes beyond control both Dow Jones & SENSEX have the MAJOR SUPPORT @ 7500 levels.

I hope it may not!!!