Hello all,
It's been an unprecedented pain for financial markets across the world. Corona Pandemic is being an invisible enemy for mankind. There is been more than 2 million people infected and approximately 7% lost their lives. Every country is ready to help each other to the extent possible and best of the best brains are working round the clock to find the antidote.
Coming to economic front, Lockdown created massive destruction to businesses. International businesses are at standstill and local consumption cycle is also disrupted. GDP is shrinking. To support the economy, central bankers across nations pumping in liquidity and taking all possible measures to support the local market. Proactive approach is highly appreciable.
Coming to financial markets, massive sell off is seen across all the markets with extreme high volatility and fear. Uncertainty on economic front and on pandemic front has left market participants confused. Experts are comparing present fall with 1987 fall. Few even went dipper to dig data of 1929 and compare the same. Let's see how our market is placed presently.
Equity market in India witnessed steep fall of approximately 40% from the top. Pullback from the bottom is almost been 24%. Such swings have taken every market participant with surprise. Let's have a look at how the formations on charts are ...
If we look at daily chart, fall was massive from the top. Due to magnitude of fall, a pullback is natural. Nifty and Dow jones charts are shown. Almost similar formations are seen on both indices. Under this present pullback, there are couple of interesting observations to watch out for ... (keeping Nifty in mind)
1. It's been a Rising Wedge Formation under pullback. As per the characteristic of rising wedge, it's a bearish formation.
2. Thrust is reached 38.2% of entire fall, which is considered as a decent pullback under Fibonacci theory.
3. During last trading session (17th April), "hanging man" formation is seen. Hanging man is considered to be bearish formation, provided there is a follow up bearish candle.
4. Last trading session (17th April) showed gap up opening. That gap remains open as of now. If follow through decisive selling emerges, then this gap can be labelled as "Exhaustion Gap", which confirms the mid term "Top" in place.
5. Due to hanging man formation with gap, there are possibilities of even "Evening star" formation. Evening star, being 3 candle formation, needs third candle to be a bearish candle (preferable gap down opening)
So, putting all together, rising wedge formation getting completed near 38.2% retracement of fall with hanging man formation with gap, all raising red flag. There are likely chances that intermediate top may get formed near 9300 zone.
Confirmation of top formation will be considered once nifty closes below 8800. Keeping risk reward ratio in mind, it is advisable to take trade on emergence of new bearish candle.
Brief about Dow jones formation is that rising wedge is getting completed near 50% of retracement with Doji formation (depicts indecisiveness) and gap in place. Rest formations are same. Breakdown confirmation on Dow jones chart will be considered confirmed once closing comes below 23200.
- Kunal Rambhia
Nice one Kunal Bhai
ReplyDeleteThank you for appreciating !
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ReplyDeleteSo, putting all together, rising wedge formation getting completed near 38.2% retracement of fall with hanging man formation with gap, all raising red flag. There are likely chances that intermediate top may get formed near 9300 zone.
Confirmation of top formation will be considered once nifty closes below 8800. Keeping risk reward ratio in mind, it is advisable to take trade on emergence of new bearish candle.
Brief about Dow jones formation is that rising wedge is getting completed near 50% of retracement with Doji formation (depicts indecisiveness) and gap in place. Rest formations are same. Breakdown confirmation on Dow jones chart will be considered confirmed once closing comes below 23200.