Couple of days back had put this chart of comparison to earlier pattern COMPARE FLAGS.
Again we will list down a few technical points.
1) GAPS Filled
Sensex has filled all the 3 gaps which we had been discussing since markets were nearing 10700 zones. The last gap at 8740-8900 is finally filled. Its a preferred thing that gaps dont remain unfilled. Also the 3 gap ups gave the ideal opportunity to book and generate cash in exhaustion.
2) Flag Pattern
Yet again we are seeing a flag formation similar to what was seen after March lows as shown in another chart. The characteristic of such a pattern is declining volumes in this period which we are seeing now. Followed by that we need to see a breakout with larger volumes to confirm. The levels on higher side for break out are roughly 9400-9700. So continue to wait for a breakout on upside to decide next move till then wait .
The 61 % fibo level is done at 8900 and markets are trading below it. The fibonacci levels are not strict technical support zones. Although in such corrections markets can correct to 75-85 % also in some cases. Generally markets are found to retrace uptill 61 % but that is not the only consideration for trading decisions.
In simple words the strategy remains the same to wait and watch , look for stock specific trades. Since the decision to book out/generate cash at 10500-10700 the view has been to look for selective trades on either short or long side. Continue to keep the above chart as a reference to catch the next direction.
Stocks to watchout for :
Technically its getting into a very crucial area of support 850-865 which can be touched in near term. A sustained close below 850 would be a real bad signal technically which could lead it closer to 700 -750 levels also.
Another stock which is trading below October lows. Technically the stock seems to be heading lower closer to 420/380/320. Although this was one of my favourite bounce backs in previous bear rallies but have avoided this time around. But still seems would be a bargain for real long term if one can start buying staggered if it comes to above 3 levels.
Some of the stocks have broken their October lows and quite a large caps cos are nearing those zones. So it will be interesting to see how it pans out in next couple of weeks. Reacting rather then predicting would be the simplest approach.