Indian Stock Market BSE SENSEX The Encore Rally
Stock-Markets / India Sep 21, 2014 - 09:46 PM GMTBy: Austin_Galt
The Indian stock market continues its march higher with no serious breakdown in price. But a significant decline can’t be too far away now. Perhaps this is the final rally - the encore rally. Let’s investigate.
DAILY CHART
We can see price recently came down but surged higher again towards the end of last week. So, we have yet another higher swing low in place with no damage to the bull trend in progress.
I have drawn a horizontal line, labelled Support, at the previous swing low in August. This support level is also where price topped out in July. Old tops often provide support in the future. Breaking down through this level would look bearish.
The Bollinger Bands show price moving away from the upper band at the start of this month and finding support at the lower band. The bounce off this lower band looks bullish. Price is already back to the middle band with the upper band in its sights.
I have added a Parabolic Stop and Reverse (PSAR) indicator which shows this recent power move up busting the dots to the upside and putting this indicator back in a bullish position.
The Stochastic indicator shows a recent bullish crossover while the Moving Average Convergence Divergence (MACD) indicator looks to be threatening one.
WEEKLY CHART
Last week showed a positive candle after being in negative territory in the first half of the week. A nice little bullish reversal.
Price has moved away from the upper Bollinger Band but it looks like it wants to have another crack at getting back up to it. One last hurrah perhaps.
The PSAR indicator is still in a bullish position so bias has to be given to more upside.
I have drawn a Fibonacci Fan which shows the move higher from the August lows has been nudging against the 38.2% angle. It may now struggle to get back above there. That would likely lead to a move back to the 50% angle and eventually lower. Breaking each angle indicates more weakness emerging.
The Relative Strength Indicator (RSI) looks to set up a triple bearish divergence on this next high. That should lead to a significant decline. That is still to be confirmed obviously. Let’s wait and see.
The MACD indicator is still bullish with the blue line above the red line. This coming top looks as if it could well form a bearish divergence here as well.
MONTHLY CHART
The RSI and MACD indicator continue to show the extremes at which this market is trading. A significant decline seems inevitable. The question is how much higher can price rise before that happens?
The PSAR indicator shows the dots still to the downside but getting steeper. Just a matter of time before the dots catch price.
Even though price has moved higher this month, we can see there has been some movement away from the upper Bollinger Band. This looks ominous. Perhaps price has a crack at attaining the upper band once again at the beginning of October.
With just over a week left in this month of September and considering the daily and weekly analysis already undertaken, I feel the month will end in positive territory. However, things really are stretched. It’s becoming ridiculous quite frankly. But the market often likes to push things to the extremes.
Given how stretched things appear, I feel the month of October will see this rubber band like market whip back. I have drawn what I think the October candle will look like. Now this is clearly subjective on my behalf. It calls for a new high in October before a reversal back down. A negative outside reversal candle as the high is higher than the previous month while the low is lower and it closes in negative territory.
We’ll just have to wait and see if things pan out like this. If it does, the next question will be is that the end of the bull market or is it just a correction before another rally further down the track breaks to new highs? We can try to answer that question at a later stage if necessary.
By Austin Galt
Austin Galt is The Voodoo Analyst. I have studied charts for over 20 years and am currently a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts, there seemed to be a dearth of technical analysts. My aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.
© 2014 Copyright The Voodoo Analyst - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
