The market is currently in very strong grip...In my last post on 16th Dec, I said that I had covered all shorts and went long....My initial stop was around 4985 which got hit once....Logically, after breaking the triangle, NF should have gone towards the lower end of the parallel channel as explained earlier. But it did not....But one thing, if might be noted, NF closed at 4948 on 21st Decemeber thereby making a double bottom on closing basis with that on 27th November 2009. There was a strong support at this level of 4940 since that was the closing lows after the Dubal panic. But, probably no one could enter at that level, since the markets fell sharply at the last 30 mins of trade and closed at that point on 21st Dec, which was the lowest point of trade on that day. If we note past records, we will find that markets have an habit of doing this many a times creating panic and then rallying very sharply the next few days so that no one can afford to enter.......No technicals, no fundamentals but a bit of emotion and psychology......
Now I will show u the following chart...
This time I put it on the line chart based on on weekly closing values....This has been done to remove the normal fluctuations and see the actual trend on closing basis....Just analyze the chart based on my previous "Mirror Pattern" which I had been focussing for quite sometime now...Note one thing that this pattern is not a technical pattern but something which I assume that markets might do this time. Within the mirror pattern, there are technical supports and resistances which I will discuss once again....
I have drawn 3 support lines in blue. Points 1 and A lie on the bottom line, similarly 2 and B lie on the 2nd line. If u notice the distance of points 1 and 2 from A and B respectively is also roughly same from the green vertical line drawn in the middle. This shows that the pattern developed after the Jan 2008 crash and the recovery taking place from Mar 2009 is similar in nature; just opposite in directions....
Now concentrate on the region between the 3rd blue horizontal line and the green horizontal line. I have marked a box on each side. This area between the horizontal lines is the area of congestion. Since I am considering the weekly line charts, the congestion an been perceived more accurately. If you put the same on line charts or candlesticks, you would find fluctuation within the band of congestion and that may sometimes create an illusion of negativity in the market. The very short term fluctuations will still be there and that can bee studied on a different day. Now that we have ultimately managed to close above the above mentioned band of congestion, we have more chances of making to much higher levels now. Mind that this band has been crossed on closing basis for 2 consecutive days and also on a weekly basis...I wont be surprised to see NF moving towards 5400-5500 zone from hereon and ultimately touching the all time highs very soon (Obviously there will again be fluctuations in this higher range but the trend is now up)....It may be noted that for the last 3 months, I was selling on any rise and was advising against fresh long positions. I was waiting for this trend confirmation to develop on charts. Now, its a buy on dips as well as on rallies....Sell OTM Feb and March puts and take home the premiums.....
Happy trading !!!
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