Technical Analysis Base

Dhanlaxmi Bank

2011-01-29T06:58:00.000-08:00

Sahil:

Long-term: Either I want the Bankex to reverse its current downtrend or I would really have to be convinced in Dhanbank's ability to create value for me. I'd have to do a complete bottom-up analysis of Dhanbank to determine its value creation potential (which will take a significant amount of time to do...). I could overlook sector conditions to a certain extent if there is tremendous value creation potential. BUT, I need the ability to withstand a negative or stagnant position for possibly a significant amount of time. Not my style of investing 'yet'.

The shorter-term: Technicals
Not looking too pretty if you want to go long.
1) I'd consider a long position only above 125. Not really interested in parking my money as I wouldn't know whether we'll witness a pick up in momentum if I buy at a lower price. But, once the 125 barrier is breached, there should be greater buying interest.
2) I'd also recommend a buy at around the 95 region and anticipate a bounce upto 110-115. But this would be like catching a falling knife. If you do, have a tight SL.
3) You can buy at a lower price once we see that the trend has reversed. But, going off of today's chart, I don't see any such signal.

Remember, the market price is at a certain level for a certain reason. Personally, I'm not interested in being the genius who spotted the true potential of a company and bought in with the accumulators. I'm looking for a level when there will be greater interest. Targeting a return potential of 20-50% in 1-3-6 months. There's no guarantee that there will be greater interest at 125, but I'll be much more comfortable taking that risk.

Sanjeet

Patni

2011-01-01T23:58:00.000-08:00

Utpal: How do you see SESA GOA in 3 months time?
Patni is signing the deal with iGate this week. What is your take on a 1-2 week time frame?

1) Sesa Goa: As of now I'm long. I really want to see it break 350 and 386 so that I can hold it till we see 490 and breakout above that. But will not be interested if we breakdown below 280. In that case, the current rally will only be corrective in nature.

2) Technically, Patni looks pretty ugly because its been consolidating in a 200 point range since September 2009. Not a very pretty picture. Very simply, if you're long, you don't want Patni below 400. If you're short, then you don't want it over 600. I do not know the details of the deal, but if the information is already public, then it should be factored in the current market price. Future price action will depend on new information. So, for some serious action within 1-2 weeks, we'll may need some sort of a surprise. Or may be just an upside breakout above the downtrend trendline in shown in Chart 1. If you are willing to risk a bit, then I'd suggest buying once price breaks out above 500 with the following profit targets: 520, 550, 600.

Chart 1. Patni Daily

Having said that, I may well be interested in Patni for the longer term given that we see a convincing breakout above 600 (and if the fundamentals are fairly decent as well). 600 was the peak formed in May 2007 and was retested in May 2010. So guess what, we break that after this year long breather that Patni has taken, then we could potentially witness a nice up move.

Chart 2. Patni
-Sanjeet Parab

DJIA for the Long-Term Bulls

2010-12-31T06:21:00.000-08:00

There is no need to write much about this monthly chart. Nor are we required to perform too much analysis.

The good news is that we've broken above the 61.8% level and that the likelihood of reaching the 100% level (2007 peak) is increased.

However, the bad news is that we have a fairly prominent peak which formed in January 2000 that will potentially resist the bullish price action.

So, I'd suggest being vigilant out there in January if we do not see a convincing breakout above 11,750.

-Sanjeet Parab

http://www.technicalanalysisbase.com/

Long Sesa Goa

2010-12-26T21:40:00.000-08:00

Its been a while since I last looked at Indian markets. Came across an excellent set up for Sesa Goa.
There are some extremely positive technical developments for Sesa Goa Bulls.

DAILY CHART SIGNALS:
1) Breakout above the downtrending resistance line
2) Bullish Slow%D Stochastic divergence
3) Breakout and close above the 308 resistance level which was tested thrice in the recent past

***For points 1 and 3, I would like to see an open and close above the trend lines. We already have an open, but will have to wait and see if Sesa Goa closes above them today (December 27, 2010). If so, then I would look for an immediate entry given that price did not run away too much from these levels. If price closes way beyond these levels, then would wait for a swing low prior to making an entry.

**Would suggest an SL at 277 because it looks like a descending triangle. So, if the bullish price action does not gain momentum from here, then beware.

--Sanjeet Parab
http://www.technicalanalysisbase.com/

479.7 pips Gain: Feedback to EUR/USD July 4, 2010 Forecast

2010-07-24T02:46:00.000-07:00

As correctly forecasted, EUR/USD rallied about 480 pips to take out 1.3 on the 10th trading day from the July 4 forecast. A $4797 gain for half a months of work... Fairly decent.

To view July 4, 2010 forecast, go to http://www.technicalanalysisbase.com/fx-corner/eur-usd-july-4-2010

Sanjeet Parab
________________________________

EUR.USD July 4, 2010- Looking for some more upside

2010-07-03T12:30:00.000-07:00

Traders should be extremely vigilant when the EUR/USD approaches the major support and resistance levels identified on the monthly chart. Of immediate interest though is that we have two fairly strong support levels at 1.2444 and 1.2399. I personally expect a minor correction to a level just above 1.2444. A bounce of either of these levels should propel the EUR/USD to 1.3 relatively quickly.

Sanjeet Parab

UB ENGG 509992- January 17, 2010

2010-01-16T05:12:00.001-08:00

CLICK HERE to view entire report.
-Sanjeet S. Parab

ZENOTECH 532039- January 17, 2010

2010-01-16T02:23:00.000-08:00

I'm definitely bullish on Zenotech. Needless to say, purely on a technical basis. http://www.technicalanalysisbase.com/stock-analysis-station/zenotech-532039--2010-01-17

IOC- January 3, 2010

2010-01-03T05:53:00.000-08:00

IOC headed for 285. Or even 255.
-Sanjeet Parab
http://www.technicalanalysisbase.com

December 24, 2009 NIFTY Short-Term Outlook

2009-12-26T06:39:00.001-08:00

The NIFTY posted a much needed rally to set the festive season off to a good start. I am willing to tolerate a partial retracement till 5083 - 5038 in anticipation of the NIFTY carrying forward to 5268-5300.

-Sanjeet S. Parab
Visit Technical Analysis Base for more Forecasts.

2009.12.08- Report NIFTY

2009-12-11T21:22:00.001-08:00

NIFTY- DECEMBER 11, 2009

ORIGINAL REPORT LINK: http://www.technicalanalysisbase.com/nifty/nifty--december-11-2009

The NIFTY came ever so close to significantly penetrating above a resistance level tested two times in the past couple months. As all other technical analysts, I am looking for a significant close above the 5182 level to mark the continuation of the previous up trend.

Now what is the likelihood of NIFTY breaking out of the current resistance? Such an occurrence is quite unlikely because of the negative divergences evident in both RSI and MACD. In other words, Nifty has reached its previous October peak but both RSI and MACD lag significantly lower than their previous peaks.

So until the Nifty posts a significant close beyond 5182, I’ll be content to go short or play the waiting game for the next 4-5 sessions.

The up trend is still intact but is looking a little fatigued. Many market participants have been expecting a consolidation phase for a while and the market has been ruthlessly whipsawing them.

· Bullish Cases:

o If Nifty penetrates above 5182, then it should achieve 5270

o Extreme case: If an ascending triangle is in play, then the minimum price objective upon upside penetration is 5900

· Bearish Cases:

o A correcting Nifty from this point on will be supported at the 4900 and 4660 levels.

o Assuming a regular flat (3-3-5) correction, the five wave impulse should carry Nifty down to a maximum 4400-4450.

o Extreme case: If a double top is in play, then the minimum price objective is 3950.

Sanjeet S. Parab

______________________________________________

3IINFOTECH- REPORT

2009-12-08T06:38:00.001-08:00

3i INFOTECH (3IINFOTECH)

ORIGINAL REPORT LINK: http://www.technicalanalysisbase.com/stock-analysis-station/2009-12-08--3iinfotech

Contents

List of Figures

Figure 1: 3IINFOTECH Significant Support/Resistance and Fibonacci Studies

Figure 2: 3IINFOTECH Prominent Chart Patterns

Figure 3: 3IINFOTECH Technical Indicators

General Information

Industry: IT Consulting & Software

Index Membership: BSE500 & BSESMLCAP

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=532628

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Price Objectives

Upper 3	108	Figure 1
Upper 2	101	Figure 2
Upper 1	92	Figure 2
Current Price	88.85
Lower 1	88.20	Figure 2
Lower 2	75	Figure 2
Lower 3	68	Figure 2

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Observations

§ Figure 1

o Major resistance at 108

§ Coinciding Factors: Resistance Level from May 2006, Triangle Apex, 61.8% Confluence Zone and the recent high of ~106.

§ Figure 2

o Symmetrical Triangle Apex at 68 will support 3i

o An intermediate W seems to be in the making. The two troughs of the W are currently being supported at 75. Furthermore, the 38.2% confluence zone nearly coincides with this level.

o The intermediate peak of the W made a high at ~88.

o 3i penetrated above this intermediate peak level (88.20) with high volume. Therefore, this level should act as support

o The minimum price objective or the W completion level is at 101

o Breakout of the descending triangle also saw a relative spurt in activity. Thus, the minimum price objective of the descending triangle is also 101.

o 3i touched its intermediate-term resistance level at ~92. An upside penetration of this level should see 3i continue rallying to 101

o Parabolic SAR: Buy

o EMA-15: Buy

§ Figure 3

o Bullish: MACD, DPO, Momentum and ROC

o Neutral: MFI and RSI

o Bearish: CCI and SlowD

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Technical Analysis

Figure 1: 3IINFOTECH Significant Support/Resistance and Fibonacci Studies

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Figure 2: 3IINFOTECH Prominent Chart Patterns

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Figure 3: 3IINFOTECH Technical Indicators

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- Sanjeet S. Parab

__________________________________________________________

2009.11.25- NeyV, Ommeinfra, Satyam, Sail, SBI, Tanla, TCS

2009-11-26T01:34:00.001-08:00

CONTENTS

NEYVILI LIGNITE (NEYVILILIG)

OM METALS INFRAPROJECTS (HDFC)

SATYAM COMPUTER SERVICES (SATYAM)

STEEL AUTHORITY OF INDIA LIMITED (SAIL)

STATE BANK OF INDIA (SBI)

TANLA SOLUTIONS (TANLA)

TATA CONSULTANCY SERVICES (TCS)

LIST OF FIGURES

Figure 20: NEVYLILIG 2004-2006

Figure 21: NEYVILILIG: 2007-2009

Figure 22: NEYVILILIG 2005-2009

Figure 23: NEYVILILIG 2008-2009

Figure 24: NEYVILILIG Technical Indicators

Figure 25: OMMEINFRA 2007-2009

Figure 26: SATYAM 2002-2009

Figure 27: SATYAM 2008-2009

Figure 28: SATYAM Technical Indicators

Figure 29: SAIL 2004-2009

Figure 30: SAIL 2006-2009

Figure 31: SAIL Technical Indicators

Figure 32: SBI 2002-2009

Figure 33: SBI 2007-2009

Figure 34: SBI 2008-2009

Figure 35: SBI Technical Indicators

Figure 36: TANLA 2008-2009

Figure 37: TANLA 2009

Figure 38: TCS 2006-2009

Figure 39: TCS 2008-2009

Figure 40: TCS Technical Indicators

NEYVILI LIGNITE (NEYVILILIG)

General Information

Industry: Electric Utilities

Index Membership: BSE 200, BSE PSU, Power

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=513683

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Price Objectives

Upper 3	190-195	Figure 21
Upper 2	180-185	Figure 21, Figure 22
Upper 1	160	Figure 22
Current Price	151	November 24, 2009
Lower 1	147	Figure 23
Lower 2	135	Figure 22
Lower 3	100	Figure 22

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Observations

§ Figure 21

o Ascending Triangle with a Price Objective of about 190-195. Will face resistance at 180-185 level

§ Figure 22

o Major resistance at ~160 because the 50% confluence zone and a resistance level coincide at this level

o Resistance at ~180: Flag Price Objective coincides with a resistance level and the 61.8% confluence zone

o Major support at ~135 and ~100

§ Figure 23

o Because of upside breakout from the ascending triangle on high volume, the likelihood of this breakout being a whipsaw is almost ruled out

o Therefore, we can expect a significant amount of support at ~147

§ Figure 24

o Neutral-Bearish Technical Indicators: MACD, RSI peaking and retracing, and DPO crossing below the signal line

o Bullish: Slow stochastic is closer to the oversold region

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Technical Analysis

Figure 20: NEVYLILIG 2004-2006

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Figure 21: NEYVILILIG: 2007-2009

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Figure 22: NEYVILILIG 2005-2009

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Figure 23: NEYVILILIG 2008-2009

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Figure 24: NEYVILILIG Technical Indicators

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OM METALS INFRAPROJECTS (HDFC)

General Information

Industry: Construction & Engineering

Index Membership: BSESMLCAP

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=531092

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Price Objectives

Upper 3
Upper 2
Upper 1
Current Price
Lower 1
Lower 2
Lower 3

Buy

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Observations

§ Figure 25

o Observe the volume skyscrapers accompanying rallies

o Accumulation phase: If you can wait for sometime, then buy with the pros

o Watch the saucer pan out nicely

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Technical Analysis

Figure 25: OMMEINFRA 2007-2009

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SATYAM COMPUTER SERVICES (SATYAM)

General Information

Industry: IT & Consulting Software

Index Membership: NONE

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500376

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Price Objectives

Upper 3
Upper 2
Upper 1
Current Price
Lower 1
Lower 2
Lower 3

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Observations

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Technical Analysis

Figure 26: SATYAM 2002-2009

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Figure 27: SATYAM 2008-2009

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Figure 28: SATYAM Technical Indicators

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STEEL AUTHORITY OF INDIA LIMITED (SAIL)

General Information

Industry: Iron & Steel/Interm. Products

Index Membership: BSE 100, METAL, BSEPSU

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500113

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Price Objectives

Upper 3	295	Figure 29
Upper 2	260	Figure 30
Upper 1	202	Figure 30
Current Price	194.60
Lower 1	150	Figure 29
Lower 2	120	Figure 29
Lower 3	95	Figure 29

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Observations

§ Figure 29

o 2007 peak at ~295

o Various support levels identified: 150, 120 and 95

§ Figure 30

o SAIL is facing resistance as lies at the 61.8% retracement level (202) of the previous correction

o A penetration above this level will set off bullish bells and we can expect SAIL to approach its 2009 peak.

§ Figure 31

o Bearish Indicators: Overbought %D and RSI approaching the overbought region.

o Neutral: DPO and MACD

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Technical Analysis

Figure 29: SAIL 2004-2009

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Figure 30: SAIL 2006-2009

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Figure 31: SAIL Technical Indicators

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STATE BANK OF INDIA (SBI)

General Information

Industry: Banks

Index Membership: SENSEX, BSEPSU

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500112

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Price Objectives

Upper 3	3215	Extensions
Upper 2	2970	Extensions
Upper 1	2574	Figure 32
Current Price	2305
Lower 1	2045	Figure 33
Lower 2	1925	Figure 33
Lower 3	1500	Figure 34

Upper 2: ((2574-891)*.236) + 2574 = 2970

Upper 3: ((2574-891)*.382) + 2574 = 3215

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Observations

§ Figure 32

o As seen in this figure, a number of coinciding Fibonacci levels and support/resistance level make them reliable support levels.

§ Figure 33

o Supports at 2045 (23.6%), 1925 (61.8%), 1500 (61.8% retracement) and 890

o Triangle Apex: 1665

§ Figure 34

o Triangle apex has formed. Thus we can expect something drastic to happen soon. Either a ferocious rally or correction.

§ Figure 35

o Technical indicators are slightly bearish.

o DPO crossing below the zero line; RSI approaching the signal line; Bearish MACD crossover

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Technical Analysis

Figure 32: SBI 2002-2009

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Figure 33: SBI 2007-2009

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Figure 34: SBI 2008-2009

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Figure 35: SBI Technical Indicators

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TANLA SOLUTIONS (TANLA)

General Information

Industry: IT Software Products

Index Membership: BSE 200, TECK, BSESMLCAP

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=532790

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Price Objectives

Upper 3
Upper 2
Upper 1
Current Price	59.45
Lower 1
Lower 2
Lower 3

Buy

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Observations

§ Figure 36

o Appears to be a saucer shaped recovery or a prolonged H&S pattern

§ Figure 37

o The symmetrical triangle gives a buy signal

o Furthermore, TANLA witnessed serious momentum on the right shoulder. High volume is accompanying rallies. This confirms the optimism.

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Technical Analysis

Figure 36: TANLA 2008-2009

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Figure 37: TANLA 2009

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TATA CONSULTANCY SERVICES (TCS)

General Information

Industry: IT & Consulting Software

Index Membership: SENSEX, BSE IT, TECK

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=532540

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Price Objectives

Upper 3	980	Extensions
Upper 2	865	Extensions
Upper 1	800	Extensions
Current Price	699.05
Lower 1	580	Figure 39
Lower 2	510	Figure 39
Lower 3	400	Figure 39

Upper 1: ((685-207)*.236) + 684 = 810

Upper 2: ((685-207)*.382) + 684 = 880

Upper 3: ((685-207)*.618) + 684 = 995

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Observations

§ Figure 38

o Penetrated its 2006 peak

§ Figure 39

o Supports: 580, 510 and 400

§ Figure 40

o Overbought RSI and %D

o Bullish MACD pattern

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Technical Analysis

Figure 38: TCS 2006-2009

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Figure 39: TCS 2008-2009

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Figure 40: TCS Technical Indicators

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-SANJEET S. PARAB

_______________________________________________________________________________________________________________

2009.11.25- Glaxo, HDFC, HDFC Bank, Indhotels, IOC and LNT

2009-11-26T01:32:00.001-08:00

CONTENTS

GLAXOSMITHKLINE PHARMACEUTICALS (GLAXOPHARMA)

HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC)

INDIAN HOTELS (INDHOTELS)

INDIAN OIL CORPORATION (IOC)

LARSEN & TOUBRO (LNT)

LIST OF FIGURES

Figure 1: GLAXOPHARMA 2002-2009

Figure 2: GLAXOPHARMA 2008-2009

Figure 3: GLAXOPHARMA Technical Indicators

Figure 4: HDFC 2002-2009

Figure 5: HDFC 2009

Figure 6: HDFC Technical Indicators

Figure 7: HDFCBANK 2003-2009

Figure 8: HDFCBANK 2007-2009

Figure 9: HDFCBANK Technical Indicators

Figure 10: INDHOTELS 2002-2009

Figure 11: INDHOTELS 2006-2009

Figure 12: INDHOTELS 2007-2009

Figure 13: INDHOTELS 2009

Figure 14: INDHOTELS Technical Indicators

Figure 15: IOC 2002-2009

Figure 16: IOC 2009

Figure 17: LNT 2006-2009

Figure 18: LNT 2007-2009

Figure 19: LNT Technical Indicators

GLAXOSMITHKLINE PHARMACEUTICALS (GLAXOPHARMA)

General Information

Industry: Pharmaceuticals

Index Membership: BSE 100, BSE HC

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500660

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Price Objectives

Upper 3	1890	Extensions
Upper 2	1760	Extensions
Upper 1	1720	Figure 2
Current Price	1665
Lower 1	1550	Figure 1
Lower 2	1440	Figure 2
Lower 3	1280	Figure 2

§ Since historical price action cannot be used to estimate upper bounds, I developed the following methodology in forecasting upper bounds. I do not know if this is similar to extensions as I have had no prior exposure to Fibonacci Extensions.

§ The assumption is that the rally from 1000 to 1550 constitutes 100% of the move. If Glaxo does not retrace from this point, then it will extend by the Fibonacci ratios.

§ Upper Bound 2: ((1550-1000)*.382)+1550 = 1760

§ Upper Bound 3: ((1550-1000)*.618)+1550 = 1890

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Observations

§ Figure 1

o Upside breakout above the 1550 resistance level

o The 23.6% confluence zone coinciding with the 1550 level should strengthen this support level

o The next major inflection point lays where the 23.6% and 61.8% confluence zones coincide- ~1250

o Worst comes to worst, Glaxo will find tremendous support at the 890 level

§ Figure 2

o An up trending channel is evident

o It will be premature to say that Glaxo failed to reach the upper trend line of the channel. Therefore, we’ll have to wait for the price action to pan out.

o If Glaxo breaks out below the lower trend line, then the price targets are determined by the Fibonacci retracement levels. (1550, 1440, 1280)

§ Figure 3

o Technical indicators are largely neutral-bearish

o Flat MACD despite Glaxo registering higher peaks and troughs.

o RSI still in the higher range.

o DPO approaching the zero line

o Declining participation as the rally progresses

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Technical Analysis

Figure 1: GLAXOPHARMA 2002-2009

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Figure 2: GLAXOPHARMA 2008-2009

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Figure 3: GLAXOPHARMA Technical Indicators

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HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC)

General Information

Industry: Housing Finance

Index Membership: SENSEX

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500010

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Price Objectives

Upper 3	~3600	Completion level of the largest ascending triangle
Upper 2	3260	Figure 5
Upper 1	2900	Figure 5
Current Price	2815
Lower 1	2450	Figure 4: 61.8% Retracement level
Lower 2	2100	Figure 4
Lower 3	1100	Figure 4

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Observations

§ Figure 4

o HDFC needed significant participation to penetrate above the 2100 level. Thus, we can say that this level will prove to be a solid level support upon retracement

o The previous peak at ~3260 in 2008 will eventually serve as a major resistance level

§ Figure 5

o HDFC is currently experiencing resistance at the 2850 level

o An upside breakout should see HDFC rally to 2900

o We should see HDFC challenging the previous peak if it manages to penetrate above the 2900

o The bullish patterns here are the 3 ascending triangles that I have identified

§ Figure 6

o Diverging DPO and %D approaching the overbought region

o If MACD forms another peak before prices retrace lower, then an MACD divergence will be evident

o RSI is perhaps headed lower. A cross below the signal line will give sell signals

o Technical indicators are neutral-slightly bearish

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Technical Analysis

Figure 4: HDFC 2002-2009

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Figure 5: HDFC 2009

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Figure 6: HDFC Technical Indicators

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HDFC BANK (HDFCBANK)

General Information

Industry: Banks

Index Membership: SENSEX, BANKEX

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500180

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Price Objectives

Upper 3	2470	Extensions
Upper 2	2220	Extensions
Upper 1	1825	Figure 7
Current Price	1740
Lower 1	1575	Figure 8
Lower 2	1425	Figure 7
Lower 3	1170	Figure 8

I will have to work with the methodology I used upper bounds for GLAXO. Assuming the 100% move is from 768 to 1817.

Upper 2: ((1817-768)*.382) + 1817 = 2220

Upper 3: ((1817-768)*.618) + 1817 = 2470

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Observations

§ Figure 7

o HDFC is fast approaching its 2008 peak’s level at ~1825

o The question is whether HDFC will be able to significantly penetrate this level

o A major support level lies at the 1425 level. The 23.6%, 61.8% and the triangle apex level coincide at this level

§ Figure 8

o Ascending Wedge- We may witness a throwover to the upside before HDFC retraces.

o Symmetrical triangle apex is only a couple trading sessions away.

o Both of the above points have major bearish implications for HDFC

o The 1575 (triangle top) is a significant support level as the 23.6% and 76.4% coincide at this level

o Retracement levels are identified.

§ 73.4% and 23.6%: 1575

§ 61.8% and 38.2%: 1420

§ 50% : 1300

§ 38.2% and 61.8%: 1170

§ 23.6% and 73.4%: 1020

§ Figure 9

o Technical indicators are imply overbought conditions.

o If HDFC continues to rally and MACD does not reach or cross its previous peak, then we will witness a negative divergence. As such, we’ll become more bearish.

o Overbought RSI and %D: Bearish implications

o Perhaps a negative divergence in the DPO because prices are rising whereas DPO continues to decline

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Technical Analysis

Figure 7: HDFCBANK 2003-2009

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Figure 8: HDFCBANK 2007-2009

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Figure 9: HDFCBANK Technical Indicators

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INDIAN HOTELS (INDHOTELS)

General Information

Industry: Hotels

Index Membership: BSE100, BSEMIDCAP

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500850

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Price Objectives

Upper 3	178	Figure 10
Upper 2	120	Figure 11
Upper 1	92
Current Price	85.35
Lower 1	83	Figure 13
Lower 2	70	Figure 13
Lower 3	51	Figure 10 and Figure 13

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Observations

§ Figure 10

o Peak at ~178 in 2008

§ Figure 11

o Penetration above a resistance line. This line is now supporting prices

o An upper price objective is the 61.8% retracement level at 120

§ Figure 12

o Saucer shaped recovery

§ Figure 13

o Up trend channel. INDHOTELS being supported by the support level at ~83

o Triangle apex level at 70 will prove to support prices

o The next support level stands at 51 where the 76.4% and another support/resistance level nearly coincide

§ Figure 14

o %D in the oversold region. Glancing over Figure 14 we can see that every time %D has reached such a low level, the price has rallied substantially

o The other indicators are neutral to bearish.

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Technical Analysis

Figure 10: INDHOTELS 2002-2009

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Figure 11: INDHOTELS 2006-2009

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Figure 12: INDHOTELS 2007-2009

Figure 13: INDHOTELS 2009

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Figure 14: INDHOTELS Technical Indicators

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INDIAN OIL CORPORATION (IOC)

General Information

Industry: Oil Marketing & Distribution

Index Membership: BSE 100, OILGAS, BSEPSU

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=530965

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Price Objectives

Upper 3
Upper 2
Upper 1
Current Price
Lower 1
Lower 2
Lower 3

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Observations

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Technical Analysis

Figure 15: IOC 2002-2009

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Figure 16: IOC 2009

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LARSEN & TOUBRO (LNT)

General Information

Industry: Construction & Engineering

Index Membership: SENSEX, BSE CG

BSE Link: http://bseindia.com/stockreach/stockreach.htm?scripcd=500510

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Price Objectives

Upper 3	2340	Figure 17
Upper 2	2100	Figure 18
Upper 1	1700	Figure 17
Current Price	1649
Lower 1	1370	Figure 17
Lower 2	1140	Figure 18
Lower 3	900	Figure 18

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Observations

§ Figure 17

o Previous peak in 2007 at 2340 level.

o Current resistance at the 61.8% confluence zone at around 1700

§ Figure 18

o Ascending triangle price objective (2100) is slightly higher than the 76.4% confluence zone (1910)

o The top of the gap up at 1140 should support LNT from falling below if the up trend is strong.

§ Figure 19

o Neutral indicators signaling either an up move or a down move of significant magnitude is possible

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Technical Analysis

Figure 17: LNT 2006-2009

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Figure 18: LNT 2007-2009

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Figure 19: LNT Technical Indicators

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- Sanjeet S. Parab

_____________________________________________________________________________________________

Peaking Bonds Signal Impending Market Correction

2009-11-24T20:52:00.001-08:00

CLICK HERE to view report in original format.

It is necessary to understand what equity, debt, forex and commodity markets are signaling. I highly recommend reading John J. Murphy’s Intermarket Analysis as you will better understand the intermarket correlations and relationships. You will be in a better position to identify market tops, bottoms, reversals, leading asset classes, and other factors that improve your analytical visibility.

As I covered in TNX v. DJIA- Intermarket Analysis, bonds lead the stock market. Its not necessary that we look for stocks to follow the same script as bonds. However, once we identify certain patterns in bond yields, we can use this knowledge to expect and be prepared for certain events in the stock market.

As shown in Figure 1, the double top has bearish implications for the stock market. I might be reading early into this. This may even be a consolidation phase after which bond yields may resume their previous uptrend. However, I’ll stay on the neutral-bearish side for the moment.

Figure 1

You cannot pinpoint the time when stocks will reverse. However, you will be ready for the reversal. For instance, if liquidity is an issue, then you can start by reducing your bullish exposure. Or if you can wait till you see a confirmation of a retracement, then you can make the most of the bullish rally and then change your stance to either cash or shorts.

-Sanjeet Parab

______________________________________________

2009.08.06- NIFTY Performance Feedback

2009-11-10T04:54:00.001-08:00

NIFTY- AUGUST 6, 2009 PERFORMANCE FEEDBACK

Initial Forecast

Actual Price Action

Figure 1: August 6, 2009 Forecast

Figure 2: Nifty Actual Price Action

Figure 3: Trend Lines Proving as Support Levels as Forecasted

Initial Forecast

CLICK HERE to view the initial forecast.

In my NIFTY- August 6, 2009 forecast I wrote:

§ You can expect NIFTY to retrace to the RED trend line identified in Figure 1.

§ The RED line should support prices. Yet, an even more significant supporting trend line is the green trend line.

Figure 1: August 6, 2009 Forecast

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Actual Price Action

§ The RED trend line, as shown in Figure 2 and Figure 3, momentarily proved as support. Upon downside penetration of this trend line, it reversed its role and resisted the NIFTY from significantly penetrating above it.

§ Furthermore, the GREEN trend line supported the NIFTY until October 22, 2009- 77 days after my forecast.

§ In my forecast I had written that a downside penetration of this green trend line should see the NIFTY carry down to 3900. Just to clarify, this would be valid if the green line had not supported NIFTY at that time. Now the retracement levels will be different. Thus, the 3900 retracement is no more valid.

Figure 2: Nifty Actual Price Action

Figure 3: Trend Lines Proving as Support Levels as Forecasted

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Sanjeet S. Parab

____________________________________

2009.11.07- MSFT

2009-11-07T03:53:00.001-08:00

MSFT (TECHNOLOGY/APPLICATION SOFTWARE)

Price Objectives

Intermediate-term Outlook

Rationale

Lower Price Objective

Figure 1: Identifying Resistance on a 10-Year Monthly Chart

Figure 2: Fibonacci Studies

Figure 3: Evident Price Gaps

Price Objectives

Extreme Upper Bound	38.07: 2001 High Retested in 2007 (Figure 1)
Upper Bound	29.35: October 23, 2009 High (Figure 2)
Current Price	28.52
Lower Bound	~ 23.84: Inflection point at the 38.2% Retracement Level (Figure 2)
Extreme Lower Bound	~ 20.5: Significant Inflection point (Figure 2)

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Intermediate-term Outlook

Bearish

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Rationale

As Figure 1 shows, MSFT faces significant resistance at the ~30 level. Even though this level was penetrated on several occasions, its significance is proven because MSFT was unable to penetrate above it on its previous attempt on October 23, 2009 when it made a high of 29.35.
MSFT is likely to retrace a portion of its previous rally because the 61.8% confluence zone (Red circles in Figure 2) resisted MSFT from breaking out.
As I identify in Figure 3, MSFT is correcting after the occurrence of the Exhaustion Gap.

In sum, the three factors listed above- (1) resistance at ~30, (2) resistance at the 61.8% confluence zone, and (3) Exhaustion gap – give me greater confidence in forecasting a retracing MSFT in the intermediate term.

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Lower Price Objective

The question then is that if MSFT follows my outlined script, then what are the lower price objectives?
~24: This level is a major inflection point because both the 38.2% confluence zones coincide almost perfectly at this level. Refer to Figure 2.
~20.5: A 61.8% confluence zone and a major support level that started in late 2000 coincide near perfectly to form a significant inflection point. Refer to Figure 1.

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Figure 1: Identifying Resistance on a 10-Year Monthly Chart

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Figure 2: Fibonacci Studies

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Figure 3: Evident Price Gaps

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-Sanjeet S. Parab

__________________________________________________

DJIA Status Update- October 4, 2009

2009-10-04T03:27:00.000-07:00

Unlike my other DJIA Forecasts on the Technical Analysis Base website, this is not an extensive analysis of the DJIA.

Major Indicators:

Resistance evident at ~10K level (Figure 1).
Log Charts (Figures 1 & 4): DJIA is touching the up trending support line. If DJIA bounces off the up trending support line, then our intermediate-term price target will be near the upper channel line (Figure 1).
Arithmetic Charts (Figures 2 & 3): DJIA is fast approaching the up trending support line . Upon downside penetration of this support line, you may expect DJIA to retrace to the support levels identified in Figure 1 and/or the Fibonacci confluence levels in Figures 2, 3 and 4.

Near-Term DJIA Forecast:

Log Charts: A bounce off of the supporting up trend line.
Arithmetic Charts: Expect DJIA to approach the supporting up trend line- Green oval identified in Figure 3.

Bearish Signals:

DJIA's inability to reach the upper channel line (Figure 1).
Downside crossover of SMA-50 (Figure 1).
Negative MACD Divergence (Figure 3).
RSI crossing below the signal line (Figure 3).

Bullish Signals:

SMA-50 potentially acting as a support level.
Since DJIA is at the lower Bollinger Band, we can expect DJIA to rally toward the upper band (Figure 1).
Supporting up trend line (Figure 1).

Figure 1 (Log Scale)

Figure 2 (Arithmetic Scale).

Figure 3 (Arithmetic Scale).

Figure 4 (Log Scale).

Don't forget to visit Technical Analysis Base website at http://www.technicalanalysisbase.com and Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

-Sanjeet Parab

________________________________

Log charts?

2009-08-11T06:41:00.000-07:00

I was going over my NIFTY August 6, 2009 forecast, and much to my delight, my forecast of a retracing NIFTY came true. Unlike my other forecasts, I didn't identify bounds/price objectives. Instead, I drew an upsloping trendline that would support the correction.

Today, I was toggling between log and arithmetic charts and observed that a trendline that may have proved to support/resist prices on a log chart may not act as the same on an arithmetic chart. Observe the image below.

So, which chart should I use? And which chart should you use in the long term?

I suggest using log charts for long-term analysis and arithmetic charts do a good job on intermediate- and near-term analysis.

Don't forget to visit
Technical Analysis Base at http://www.technicalanalysisbase.com and
Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab
__________________________

NIFTY- August 6, 2009

2009-08-06T17:14:00.000-07:00

To view my analysis on NIFTY, CLICK HERE or GO TO: http://www.technicalanalysisbase.com/nifty/nifty--august-6-2009

Also visit:

My Website: http://www.technicalanalysisbase.com and
Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab
_______________________________________

SPX- Intermediate-Term Outlook

2009-08-04T02:38:00.000-07:00

CLICK HERE to view Complete Report which includes the charts identifying major inflection points and chart patterns.

Bearish Case:

If I’ve identified the chart patterns correctly, then my intermediate term outlook is bearish.
The ascending wedge identified in Figure 1 (SPX Chart) has major bearish implications.
Be aware of the characteristic throwover (whipsaw/false breakout) that the Elliott Wave Principle often cautions against. Apply the 2-day or 3% filters before taking bullish positions or place stops to protect major losses because the moves after wedge penetrations are often significant.
Complementing this bearish outlook is the descending wedge on the VIX Chart in Figure 2. The descending wedge implies a potential increase in volatility as VIX penetrates the wedge to the upside. Because VIX and SPX are negatively correlated, a rallying VIX has major bearish implications for the SPX.
Resisting Factors:

1) 38.2% Confluence Zone at 1,016.14
2) Upper Trend line of the Ascending Wedge currently coinciding with the 38.2% Zone identified in point (1)
3) Significant resisting down trend line starting from the October 2009 peak
4) 50% Confluence Zone at 1,056.19.

§ It appears that the current rally is Wave 5 of the first impulsive Wave. Thus, a rather rapid retracement down to the 860 level can be expected.

Bullish Case:

H&S Bottom- SPX penetrated the neckline.
The ascending wedge identified in Figure 1 may indeed be a leading triangle in Wave 1 of an impulse.
Thus, any correction will be supported by the neckline or the lower trend line of the wedge/leading diagonal.
Supporting Factors:

1) H&S Bottom Neckline
2) Ascending Wedge Supporting Trend Line
3) 38.2% Confluence zone at ~969

Outlook:

Depending on your risk tolerance, make your moves before/after prices confirm the next relative direction.
My intermediate term outlook is bearish because the next wave is most likely going to be corrective in both the bearish and the bullish cases.
Bullish Case: Return move to the neckline- Bearish implications
Bullish Case: Leading Diagonal in Wave 1- Bearish implications because Wave 2 is corrective in nature
And I’ve outlined my bearish factors and reasoning under the Bearish Case

Don't forget to visit Technical Analysis Base website at http://www.technicalanalysisbase.com/ and Sanjeet Parab Blog at http://sanjeetparab.blogspot.com/

Sanjeet Parab

_______________________________

TRIANGLE APEX- MARKET TIMING TOOL IN FX AS WELL

2009-07-20T01:30:00.000-07:00

This report covers 2 topics:

Triangle Apex can be used as a market timing tool in FX as well.
Update to my EUR/USD July 14, 2009 forecast.

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It should not be of any surprise that the triangle apex can be used as a tool to time major trend changes or reversal in FX as well.

CLICK HERE to view the report that explains how triangle apex can be used to time major trend changes or reversals. This report includes 16 charts proving the potential of triangle apexes as a market timing tool.

As the following chart shows, the EUR USD reversed at precisely the time the triangle apex formed. Again, this is an ideal scenario. The scenario could be far form ideal depending on how the triangle is identified by the analyst. The lesson though is to expect a major trend change or reversal at approximately the time the triangle apex is expected to form. So the analyst should be aware at least 3-5 periods before and after the apex forms.

Although major trend changes may not occur at every apex, if you view the report I prepared on my site, then you will agree that it is worthwhile to identify triangle apexes and be alert during that period.

UPDATE to EUR/USD FORECAST (JULY 14, 2009)

CLICK HERE TO GO TO ORIGINAL FORECAST

Triangle breakout June 20, 2009. I am looking for two daily consecutive closes beyond the upper trend line of the triangle. Since the triangle formed in Wave 4, Wave 5 is likely to be sharp. A type of mania.

Minimum Price Objective: The minimum price objective is from 1.46-1.48. EUR/USD may face resistance at the 61.8% confluence zone ~1.46. Would take some profits off the table and leave a portion of risk capital to partake of further capital appreciation.

Maximum Price Objective: Max price objective is 1.49-1.55.

Corrective A-B-C: Whether EUR/USD reaches 1.49/1.55, we could expect a complete retracement of wave 5. The sharper the rally from here on, the more quick and painful will be the retracement.

Figure 1: Observe the timing of the apex and the M reversal.

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Technical Analysis Base Website at http://www.technicalanalysisbase.com and
Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab
________________________

Triangle Apex- A Tool to Time Major Trend Changes or Reversals

2009-07-19T02:03:00.000-07:00

Go to http://www.technicalanalysisbase.com/other-reports/triangle-apex--a-tool-to-time-major-trend-changes-or-reversal to view complete report which includes 16 charts proving the potential of triangle apexes as a market timing tool.

I was reading The Elliott Wave Principle by Frost and Prechter and came across a line that was probably mentioned only once in the entire book. It was something along the lines of ‘the authors observed that the time when the trend lines of the horizontal triangles converge is the time when there is a major change in trend.’ In other words, the analyst should expect a major change in trend when a triangle apex is expected to form.

Although I cannot present any statistical study or academic review that supports the reliability of this observation, the analyst or trader should be proactive and aware of potentially significant moves during the time the apex is expected to form.

Rather than write about this phenomenon, I’ll show it to you.

Also, now that we are on triangle apexes, the level where the triangle apex forms often serves as support/resistance.

Go to http://www.technicalanalysisbase.com/other-reports/triangle-apex--a-tool-to-time-major-trend-changes-or-reversal to view complete report which includes 16 charts proving the potential of triangle apexes as a market timing tool.

Go to http://www.technicalanalysisbase.com/other-reports/triangle-apex--a-tool-to-time-major-trend-changes-or-reversal to view complete report which includes 16 charts proving the potential of triangle apexes as a market timing tool.

Don't forget to visit
Technical Analysis Base Website at http://www.technicalanalysisbase.com and
Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab
________________________

Significance of Long-term Analysis and Inflection Points

2009-07-18T20:33:00.000-07:00

Go to http://www.technicalanalysisbase.com/other-reports/significance-of-long-term-analysis-and-inflection-points to see original post on my website.

In this post I will outline how identifying long-term support/resistance levels and major inflection points using Fibonacci confluence zones can prove to be one of the most reliable predictor or the next move.

Significant support and resistance levels are bread and butter for traders. Executing positions around “significant” levels minimizes the likelihood of getting whipsawed, and therefore, often prove profitable. My first step in conducting any analysis is to identify major support and resistance levels on a long-term chart.

Long-term Analysis

The goal is to identify “significant” support and resistance levels by first analyzing long-term charts. The longer the horizon, the better will be the analysis. The significance of a support or resistance level increases with the time the level has remained intact and with the number of times the prices have tested this level and not significantly penetrated* it. Following are the type of charts I begin with.

10-year Monthly Chart
5-year Weekly Chart
2-year Daily Chart

The implications of long-term analysis are straightforward. For instance, if price is at a support level that has been tested 3 times but not penetrated in the last 10 years, then a bounce off of this level will signal a buy opportunity. On the contrary, a penetration below this significant support level will have major bearish implications (ignoring the likelihood of trader’s remorse).

Figure 1

Identify Major Inflection Points

Fibonacci studies are an excellent tool to identify major inflection points. When used in conjunction with trend lines, chart patterns, volume analysis, and technical indicators, an analyst can identify significant inflection points and earn greater risk-adjusted returns. The heuristic in determining the significance/strength of a particular inflection point is as follows:

The inflection point increases in significance/strength with every increasing factor coinciding at the point.
Furthermore, inflection points increase in significance as the periodicity increases. For instance, an inflection point on a monthly chart is more significant than one on a daily chart.

Example:

Inflection Point 1
61.8% Confluence Zone
Down Trend Line
Major Resistance
Overbought Oscillators
Momentum Divergence
Low Volume

Inflection Point 2
61.8% Confluence Zone
Down Trend Line
Major Resistance
Overbought Oscillators

In this case, clearly Inflection point 1 is stronger as it has 6 factors coinciding together as opposed to 4 factors for Inflection Point 2. Observe the circled inflection points in Figure 2 below.

The RED CIRCLE inflection point is when the 61.8% retracement level and the significant support level identified in Figure 1 coincide. Therefore, an analyst who would be aware of the major support level (current resistance- once a support is penetrated, it changes role to being a resistance level) at ~101, would be wary of this major inflection point and of USD/JPY ability to penetrate above this level.

By identifying inflection points, a trader is more likely to execute trades with better risk-reward ratios. As shown in Figure 2, such inflection points are evident on intermediate-term charts as well.

Conclusion

Identify major support and resistance levels on long-term charts.
Conduct Fibonacci Studies. 61.8% confluence zone is a major level as it is considered to be the Golden Ratio. But be careful around the other levels as well as prices tend to retrace 3/8-4/8 of its previous move.
Conduct other technical analysis such as identify chart patterns, trends, and technical indicators.
Identify the major inflection points.
Determine the strength of inflection points. If a resisting inflection point is significantly strong, then a penetration above this level is on weak grounds. Prepare for shorts. Even if price penetrates above this resisting inflection point, then it may be a whipsaw. That is why, don’t buy the initial penetration. But buy the return move with a tight stop below the resisting level.

_________________
*The two filters to identify a significant penetration of a support/resistance are
2-period Filter: two consecutive closes beyond the support/resistance level. For instance, a valid penetration on a 10-year Monthly (Daily) Chart will be 2 consecutive ‘monthly’ (daily) closes beyond a certain level.
Percentage Filter: A certain percentage point beyond a support/resistance level. Consider your risk tolerance to determine the percentage.

Don’t forget to visit
Technical Analysis Base Website at http://www.technicalanalysisbase.com and Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab

________________________

EUR/USD Forecast

2009-07-14T17:20:00.000-07:00

Where is EUR/USD Headed for?

EUR/USD is forming a symmetrical triangle in Wave 4 of Wave III. The next move (Wave 5) will be an upside penetration.

Minimum Price Objective

The minimum price objective of Wave 5 is 1.4601-1.47. Wave 1 and Wave 3 were equal in %. If Wave 5 is extended, then EUR/USD should rally to at least 1.55 to end the impulsive phase of Wave III.

Strategy

Buy Long

Be alert on August 8. (Aug 6-10)

This is my first attempt at implementing technical analysis on FX. Lets see what happens.

Don't forget to visit:
Technical Analysis Base Website at http://www.technicalanalysisbase.com and
Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab
_____________________________

Upcoming Posts

2009-07-12T12:55:00.000-07:00

Using Triangles to Forecast the Time of Penetration and Major Trend Changes- In this post I will show how triangle apexes can be used to identify major support and resistance levels and expect major trend changes. Furthermore, I will also show how you can determine the direction of penetration, the expected time of triangle penetration and the minimum price objective of the subsequent price action. This post will incorporate conventional technical analysis principles as well as the Elliott Wave Principle.
What stage of the business cycle is the US Economy in?- I will compare the relative strengths of the 9 AMEX SPDRs to determine the stage of the business cycle the US economy is in.
Which asset classes and sectors will result in the best performance at this stage of the business cycle?- I will first identify whether to invest in stocks, bonds or commodities. Then, assuming the investment portofilio is comprised completely of equities, by using insights from sector rotation, I will identify the particular sectors that will give investors the greatest earnings potential (high return or limited losses relative to other sectors.

Don't forget to visit

Technical Analysis Base Website at http://www.technicalanalysisbase.com and

Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab

__________________________________

Bonds Lead Stocks: Watch the Bond Market for Clues on where the Equity Market is Heading

2009-07-11T18:34:00.001-07:00

It is fairly obvious that the stock market serves as a leading economic indicator. In the 8 business cycles from 1948 to 1990, the S&P 500 led turns in the business cycle by an average of 7 months, with a nine-month lead at peaks and a five-month lead at troughs. A lead time of 7 months to get ready for a major change in the economy! How about a lead time of 27 months?

For such a lead time, you need to go to the bond markets. In Geoffrey Moore’s Leading Indicators for the 1990s, Victor Zarnowitz writes:

The [Dow Jones Index of Corporate Bonds] led at each of the eight business cycle peaks since 1948 and at each of the eight troughs. Its leads at business cycle peaks were very long and highly variable, ranging form 10 to 58 months, and averaging 27 months. Its leads at troughs were also long relative to the observed distributions of such leads and the durations of business cycle contractions: they ranged from 3 to 13 months and averaged 7 months.

Although the variability of lead times is concerning, by knowing that bond markets give a longer lead time than stock markets, an analyst is better prepared for anticipate changes in the stock market and the economy. Let me make it absolutely simple.

Business Cycle Peak (Trough)

Bonds will tell you 27 (7) months in advance that the economy will peak (bottom)
Stocks will tell you 9 (5) months in advance that the economy will peak (bottom)

So, once the bonds peak, you can expect the stock market to peak as well. You will be aware of overbought conditions, saturations, bubbles, and will be in a better shape to think like contrarians.

October 2007 Peak

As the chart shows, bonds (10-year US Treasuries) peaked in May-June 2006. That gave investors a lead time of 16-17 months before the October 2007 peak in the stock market. Bond yields approached the May-June 2006 peak in June-July 2008. Even this peak gave investors 3-4 months lead time to understand the overbought nature of the stock market. You might not have gotten out at the peak, but after identifying an MA or Head & Shoulders Top, you could have limited your losses.

CAUTION: It is always easy to pick peaks in perfect hindsight. But, with some experience and a lot of practice, you will foresee things that are possibly unbelievable true. It all sounds good in writing, but you need the patience to sit through a number of months before major turns.

Conclusion

I don’t think anybody would claim perfect market timing. Neither do I. But, by understanding the correlation between bond and equity markets, you are better equipped to evaluate the merits of price action and anticipate major trend changes.

Don't forget to visit

Technical Analysis Base Website at http://www.technicalanalysisbase.com and

Sanjeet Parab Blog at http://sanjeetparab.blogspot.com

Sanjeet Parab

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H&S Top: DJIA Retracing- Update to June 29, 2009 Forecast

2009-07-09T20:38:00.000-07:00

CLICK HERE to go to June 29, 2009 DJIA Forecast.

Price Objectives Identified in the June 29, 2009 Forecast

2X Extreme Upper Bound
10,948-11,500
Identified Resistance (Chart 1)-H&S completion level (Chart 4)

Extreme Upper Bound
9,021-9,043
Major Resistance (Chart 2)

Upper Bound
8,900
Chart 3

Current Price
8,529

Lower Bound
7,958
38.2% Confluence Zone (Chart 3)

Extreme Lower Bound
7,449
Charts 1,2,3,4 and 6

2X Extreme Lower Bound
7,193
Major Support (Chart 1)

Update

In my June 29, 2009 forecast, I identified that the DJIA is correcting using the Elliott Wave Principle
Today (July 9, 2009), 9 trading days later, an MA pattern or a Head & Shoulder top is clearly visible.
The minimum price objective for the H&S Top is about 7,600.
The penetration of the neckline was not on heavy volume. High volume break downs are not required at tops because the market has a tendency to fall on its own weight.
Furthermore, this H&S pattern is fairly reliable because declining volume is evident on the head and right shoulder.
A return move is in play.
SMA-15 crossover of the SMA-50 triggered a sell signal.

June 29, 2009 Update/DJIA Weekly/Technical Analysis Base Home

Alternate Formation

An alternative H&S top can be drawn with a brief right shoulder.
In that case, the penetration of the neckline was accompanied with high volume.
The return move to the green neckline also faced resistance.
I wouldn’t classify this alternative H&S as a proper H&S because the right shoulder is more a bear flag than a shoulder.
The bear flag pattern met the minimum price objective when it reached the brown neckline.

June 29, 2009 Update/DJIA Weekly/Technical Analysis Base Home

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Wave Personality- Elliott Wave Principle

2009-06-30T11:43:00.000-07:00

The idea of wave personality is a substantial expansion of the Wave Principle. It has the advantage of bringing human behavior more personally into the equation and even more important of enhancing the utility of standard technical analysis. The personality of each wave in the Elliott sequence is an integral art of the reflection of the mass psychology it embodies. The progression of mass emotions from pessimism to optimism and back again tends to follow a similar path each time around, producing similar circumstances at corresponding points in the wave structure. These properties not only forewarn the analyst about what to expect in the next sequence but at times can help determine one’s present location in the progression of waves.

1) First waves- As a rough estimate, about half of first waves are part of the “basing” process and thus tend to be heavily corrected by wave two. In contrast to the bear market rallies within the previous decline, however, this first wave rise is technically more constructive, often displaying a subtle increase in volume and breadth. Plenty of short selling is in evidence as the majority has finally become convinced that the overall trend is down. Investors have finally gotten “one more rally to sell on,” and they take advantage of it. The other fifty percent of first waves rise from either large bases formed by the previous correction, as in 1949, from downside failures, as in 1962, or from extreme compression, as in both 1962 and 1974. From such beginnings, first waves are dynamic and only moderately retraced.

2) Second waves- Second waves often retrace so much of wave one that most of the profits gained up to that time are eroded away by the time it ends. This is especially true of call option purchases, as premiums sink dramatically in the environment of fear during second waves. At this point, investors are thoroughly convinced that the bear market is back to stay. Second waves often produce downside non-confirmations and Down Theory “buy spots,” when low volume and volatility indicate a drying up of selling pressure.

3) Third waves- Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Increasingly favorable fundamentals enter the picture as confidence returns. Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series. It follows, of course, that the third wave of third wave, and so on, will be the most volatile point of strength in any wave sequence. Such points invariably produce breakouts, “continuation” gaps, volume expansions, exceptional breadth, major Dow Theory trend confirmations and runaway price movement, creating largely hourly, daily, weekly, monthly or yearly gains in the market, depending on the degree of the wave. Virtually all stocks participate in third waves. Besides the personality of “B” waves, that of third waves produces the most valuable clues to the wave count as it unfolds.

4) Fourth waves- Fourth waves are predictable in both depth (see Depth of Corrective Waves) and form, because by alternation they should differ from the previous second wave of the same degree. More often than not they trend sideways, building the base for the final fifth wave move. Lagging stocks build their tops and begin declining during this wave, since only the strength of a third wave was able to generate any motion in them in the first place. This initial deterioration in the market sets the stage for non-confirmations and subtle signs of weakness during the fifth wave.

5) Fifth waves- Fifth waves in stocks are always less dynamic than third waves in terms of breadth. They usually display a slower maximum speed of price change as well, although if a fifth wave constitutes an extension, speed of price change in the third of the fifth can exceed that of the third wave. Similarly, while it is common for volume to increase through successive impulse waves at Cycle degree or larger, it usually happens below Primary degree only if the fifth wave extends. Otherwise, look for lesser volume as a rule in a fifth wave as opposed to the third. Market dabblers sometimes call for “blowoffs” at the end of long trends, but the stock market has no history of reaching maximum acceleration at a peak. Even if a fifth wave extends, the fifth of the fifth will lack the dynamism of what preceded it. During the fifth advancing waves, optimism runs extremely high, despite a narrowing of breadth. Nevertheless, market action does improve relative to prior corrective wave rallies.

6) “A” waves- During “A” waves of bear markets, the investment world is generally convinced that this reaction is just a pullback pursuant to the next leg of advance. The public surges to the buy side despite the first really technically damaging cracks in individual stock patterns. The “A” wave sets the tone for the “B” wave to follow. A five-wave A indicates a zigzag for wave B, while a three-wave A indicates a flat or triangle.

7) “B” waves- “B” waves are phonies. They are sucker plays, bull traps, speculators’ paradise, orgies of odd-lotter mentality or expressions of dumb institutional complacency (or both). They often involve a focus on a narrow list of stocks, are often “unconfirmed” by other averages, are rarely technically strong, and are virtually always doomed to complete retracement by wave C. If the analyst can easily say to himself, “There is something wrong with this market,” chances are it’s a “B” wave. “X” and “D” waves in expanding triangles, both of which are corrective wave advances have the same characteristics. As an observation, “B” waves of Intermediate degree and lower usually show a diminution of volume, while “B” waves of Primary degree and greater can display volume heavier than that which accompanied the preceding bull market, usually indicating wide public participation.

8) “C” waves- Declining “C” waves are usually devastating in their destruction. They are third waves and have most of the properties of third waves. It is during this decline that there is virtually no place to hide except cash. The illusions held throughout waves A and B tend to evaporate and fear takes over. “C” waves are persistent and broad. 1930-1932 was a “C” wave. Advancing “C” waves within upward corrections in larger bear markets are just as dynamic and can be mistaken for the start of a new upswing especially since they unfold in five waves. The October 1973 rally was a “C” wave in an inverted expanded flat correction

9) “D” waves- “D” waves in all but expanding triangles are often accompanied by increased volume. This is true probably because “D” waves in non-expanding triangles are hybrids, part corrective, yet having some characteristics of first waves since they follow “C” waves and are not fully retraced. “D” waves, being advances within corrective waves, are as phony as “B” waves.

10) “E” waves- “E” waves in triangles appear to most market observers to be the dramatic kickoff of a new downtrend after a top has been built. They almost always are accompanied by strongly supportive news. That in conjunction with the tendency of “E” waves to stage a false breakdown through the triangle boundary line, intensifies the bearish conviction of market participants at precisely the time that they should be preparing for a substantial move in the opposite direction. Thus, “E” waves, being ending waves, are attended by a psychology as emotional as that of the fifth waves.

All material is borrowed from and all credits go to Frost and Prechter's Elliott Wave Principle.

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Where is the DJIA headed? June 29, 2009 forecast

2009-06-30T10:19:00.000-07:00

This post only consists of the executive summary to my complete report. CLICK HERE or go to http://www.technicalanalysisbase.com/djia-weekly/june-29-2009-djia to access the complete report.

Unlike all my previous DJIA forecasts, this analysis is not intended to be a weekly forecast. The primary objective is to identify major inflection points. Following are the highlights of the report:

Major support at 7,449 and 7,193 (Chart 1 and Chart 3). Major inflection point (support level in this case) at 7,388-7,449 (Chart 4).

Major Resistance at 9,043 (Chart 2). Significant resistance level around 8,529 (triangle apex level identified in Chart 4).

SMA-15 > DJIA > SMA-200 > SMA-50 (Chart 3). SMA-50 crossover of SMA-200 will be bullish.

If the corrective wave was of the zigzag family, then the correction of the cycle degree is complete. DJIA then is in impulsive mode.

The recent rally was the first wave of intermediate degree. DJIA is now in wave 2.
A head and shoulders bottom appears to be forming. Therefore, wave 2 should signal the formation of the right shoulder. The maximum retracement will be till 7,388-7,449.

The only concerning observation is that the correction from June 11, 2009 onwards has reached the base of wave 4. The latest price action indicates the start of the next wave. The next wave will carry DJIA much higher if the correction was a zigzag. However, a flat correction should see DJIA consolidate and end lower in the intermediate term.

In case of a flat correction, the DJIA should reach from ~8,900-9,021 before making the 5 waves down of the 3-3-5 variation.

If the latest zigzag is not completed yet, then the minimum price objective is 7,958 (38.2% confluence zone identified in Chart 3).

Triangle apexes often signal major changes in trends. At the apex of the symmetrical triangle (apex 1 in Chart 10), the VIX began its descent from around 46 to 25. Apex 2 is the apex of an artificially drawn descending triangle.

The more traditional descending triangle apex (apex 3) occurs on July 13. July 13 is a Monday, the day which statistically results in the least returns.

Perhaps VIX will quietly touch ~23 (Descending Triangle completion level) by July 13 before violently rallying. A VIX rally has extremely bearish implications for the DJIA. Refer to Correlation during the Recent Market Downturn to see correlation details.

INFLECTION POINTS

ELLIOTT WAVE PRINCIPLE APPLIED

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Correlation between CBOE VIX and DJIA

2009-06-29T05:53:00.000-07:00

In this post I will only present the hard facts of the correlation between the CBOE VIX and DJIA.

In my upcoming posts I will look into

market volatility
outline some strategies to forecast DJIA's price action using VIX

Time Period VIX & DJIA Correlation
October 11, 2007 - March 6, 2009 -.8553
March 9, 2009 - June 11, 2009 -.9265

CLICK HERE to see the complete table.

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AMZN April 22, 2009 Forecast and Actual Price Action

2009-05-31T21:44:00.000-07:00

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INITIAL FORECAST: AMZN 04.22.2009

Extreme Upper Bound: $86.69
Upper Bound: ~$84
Current Price: $81.27
Lower Bound: $65
Extreme Lower Bound: $57.08

HIGHLIGHTS:

Bearish bias: Extreme Upper bound is only ~$5 above the current price, whereas Extreme Lower Bound is ~$23 below the current price.
Extreme Upper Bound: $86.69 derived from the previous peak.
As shown in Chart 2, AMZN peaks at $86.68 before retracing 50% of its last rally.

Chart 1: AMZN Initial Forecast April 22, 2009

Chart 2: ACTUAL PRICE ACTION- AMZN 04.22-05.29.2009

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