Next leg of the bull run likely to begin soon
After this correction is over we should resume the fifth leg of this bull mkt to complete a five-wave pattern called an impulse, feel experts. All Headlines | Gainers & Losers
What the Sensex started in May 2003 at 2904 was part of a multi-year bull run. It finished a larger third wave up at 21206, but the larger move, which is subdividing into a five-wave pattern called an impulse, seems incomplete, implying that after this correction is over we should resume the last or fifth leg of this bull market. The answer lies in wave personalities and wave equalities.
We have had one major panic low on the chart at 2594, post 9/11, which is characteristic of the start of any bull run. We then started a larger wave-III move from the lows of 2904, which itself subdivides into five waves. The break-up of the move: ���Wave I��� started at 2904 (2003) and ended near the election time at 6249 (January 2004). From there a ���wave II��� started and ended precariously after the BJP rule at 4227 (May 2004) after completing a 61.8% retracement of the previous ���wave I���.
The rally that started afterwards was the mother of all bull runs to date and saw the index going from 4227 to 14723 (February 2007) in three years, with the ���wave III of 3��� extending as much as 200% of ���wave I��� on log scale charts.
The ���wave IV��� then played out between February-March 2007 made a significant bottom at 12316. The ���wave V��� then scorched its way till 21206 and completed wave III.
Then came the spanner in the India story and investors were ���surprisingly disappointed��� (wave personality), suffering a rude awakening when a larger wave IV, which has already retraced more than 35% of wave III played out from the upper channel resistances at 21206.
This leaves us with one pending move-up and investors could have one last but risky chance at making some moolah. Risky, as this would be the last leg after which a 1-2 year bear market is in store. The wave IVcould extend worst case till 13800.
The pending wave V should target, at least, 18350, which is 61.8% retracement levels for the fall from 21206-13800. The wave equality target would leave us near to 20000 levels and that���s the second alternative target level for the Sensex, going forward. But investors should start booking some profits from 18000 levels on long positions, as 18350 looks a better bet meaning that the wave V is likely to truncate.
Heavy weight RIL holds the key to this view and should not break 2050-2100 levels. The stock looks good till 2800-2900 levels. Couple of banking stocks like SBI, too, have completed corrections. So, bargain hunting at 13800-14000 levels could be a good bet for the next six months.
Sarvendra Srivastave, Senior technical analyst (equities & commodities), Sharekhan
We have had one major panic low on the chart at 2594, post 9/11, which is characteristic of the start of any bull run. We then started a larger wave-III move from the lows of 2904, which itself subdivides into five waves. The break-up of the move: ���Wave I��� started at 2904 (2003) and ended near the election time at 6249 (January 2004). From there a ���wave II��� started and ended precariously after the BJP rule at 4227 (May 2004) after completing a 61.8% retracement of the previous ���wave I���.
The rally that started afterwards was the mother of all bull runs to date and saw the index going from 4227 to 14723 (February 2007) in three years, with the ���wave III of 3��� extending as much as 200% of ���wave I��� on log scale charts.
The ���wave IV��� then played out between February-March 2007 made a significant bottom at 12316. The ���wave V��� then scorched its way till 21206 and completed wave III.
Then came the spanner in the India story and investors were ���surprisingly disappointed��� (wave personality), suffering a rude awakening when a larger wave IV, which has already retraced more than 35% of wave III played out from the upper channel resistances at 21206.
This leaves us with one pending move-up and investors could have one last but risky chance at making some moolah. Risky, as this would be the last leg after which a 1-2 year bear market is in store. The wave IVcould extend worst case till 13800.
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The pending wave V should target, at least, 18350, which is 61.8% retracement levels for the fall from 21206-13800. The wave equality target would leave us near to 20000 levels and that���s the second alternative target level for the Sensex, going forward. But investors should start booking some profits from 18000 levels on long positions, as 18350 looks a better bet meaning that the wave V is likely to truncate.
Heavy weight RIL holds the key to this view and should not break 2050-2100 levels. The stock looks good till 2800-2900 levels. Couple of banking stocks like SBI, too, have completed corrections. So, bargain hunting at 13800-14000 levels could be a good bet for the next six months.
Sarvendra Srivastave, Senior technical analyst (equities & commodities), Sharekhan
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