One more Nifty chart

Bull market corrections

Yesterday when I read about Bull market corrections in one of the blog which I follow; I also thought of writing about it in my blog for my readers. In fact I wrote about Bull market corrections two times in my blog in August 2010. Click here 1, 2 for details...

First talking about bull market, the technical definition (according to Dow theory) of the bull market in simple terms is higher highs and higher lows. This means market will make new highs and bottoms after each corrections will be new lows without breaching previous correction's lows.

For your information I have collected some details from this present bull trend (you may call it as market also!) which started from March 2009. First one is above graph in I have shown 5 corrections. For each correction I have collected some more information which is as below...

Peak level	Bottom level	Correction(Absolute)	Correction(Percentage)
4600	4000	600	13.04
5120	4580	540	10.55
5275	4725	550	10.43
5375	4820	555	10.33
6310	5750	560	8.87

If you see the above table & graph there are some resemblances in each corrections like

1. Each part of bull lasted fro 2 months
2. Following correction from each bull lasted for one month
3. Average correction in Nifty in absolute terms is in the range of 540-600 points
4. Each time Nifty faced correction of 10% to 13% at max
5. Each correction bottomed around either @ 100 day EMA or @ 200 day EMA
6. For each correction RSI had shown oversold point (touching level of 30) each time

Now coming to present correction, Nifty on closing basis started correcting from 6310 levels and closed on Friday at 5750 levels, that is of 560 points fall which is in the range of previous falls. But here there are some differences like

--> In percentage terms it is almost 9% percent, so couple of more percentage fall might be there for Nifty to bottom out and consolidate
--> If you see the RSI, still it is not in oversold zone, that is it is yet to touch 30 levels in the oscillator
--> 200 day EMA is @ 5523 and 100 day EMA is @ 5800 which is already broken on closing basis for 2 days. So I feel Nifty may bottom out and consolidate in the range of 5650 (considering global & country's news flow may not averse) which is another 100 points fall from present level and also 10% fall from the peak which will be in line with the previous falls and within the broad trend.

Nifty movement

Will Nifty hold onto October lows of 5940-5950? A big question mark after today's fall. On Ireland debt and China's possible monetary action triggered Asian markets sell off. Whatever may be the reason, charts are predicting the similar patterns what happened during 4800-5500 levels of Nifty between February and May.

Coming to present present fall, Nifty witnessed successive fall forming large "BEARISH ENGULFING" patterns. Nifty for time being should find support at 596o levels, if that level breaks this CORRECTIVE PATTERN should find the 5880-5860 which is also a 100 day moving average support and trend line ending point. Even RSI is also not showing overbought condition in its oscillation. If that breaks then I feel there will be a lot of selling pressure and fresh shorts may be created in the market.

Another possible breakout in Hanung Toys

The stock which I found out at Rs. 120 odd levels around 6 months back now trading at Rs. 400. Now question is not about the finding the stock or price discovery or for that matter stock discovery. Question is price movement along with other technical indicators like volume, MACD Moving Average Convergence & Divergence), RSI (Relative Strength Index) & etc.

As I marked in above graph, every time stock breaks out of consolidation range it moves with large volume with movement in MACD or RSI or Stochastics. So you need to look at all possible angles before you jump into or out of the stock not just by looking at stock price movement.

Nifty could find demand zone around 5980-6000