Today the market went down with a thud and some very interesting patterns are now appearing on the charts. the first chart shows that the trend line which is forming since the lows of March 2009 is broken today. If the market closes below 5600 on a weekly basis than it may cause further weakness in the market. If we take 38.2% retracement of the entire up move from the bottom of 2200 the first supports comes at 4700 levels.
The second chart is also a weekly chart of Nifty. In this chart we can clearly see a head and shoulder pattern developing. The neckline for this pattern is around 5350 -5300. Therefore if the market closes below 5600 (on weekly basis) the next target will be 5350. But looking at the larger patter I believe that there is extremely high probability that the support of 5300 will be broken.
If 5350 is broken the most likely target for Nifty will be 4700 which is the target for the pattern. As I have marked in the third chart
The most likely scenario which is going to be played form the current levels as per my understanding is that market will crack to 4700. If a person wants to go short he can go short if the market closes on Friday below 5600. With a stop loss of 5850 and target of 5350 and if 5350 is broken the next target will be 4700.
Readers should also keep in mind that there is alternate scenario which is forming right now. In the chart we given below we can see that Nifty is also forming a inverse head and shoulder pattern which is inherently a bullish pattern. If nifty fails to close this week below 5600 than there are high probability that market may bounce back and break the trend line which is near 5850. The most likely target for any break of trend line will be 6500.
To summarize my post, If nifty closes below 5600 the most likely target for nifty would be 5350 and 4700 (if 5350 is broken). I will give 70% probability to this scenario.
The alternate scenario is that market will fail to close below 5600 (weekly basis) and it will move up and break 5850. In that case market can go up to 6500.
NIFTY WEEKLY CHART
The second chart is also a weekly chart of Nifty. In this chart we can clearly see a head and shoulder pattern developing. The neckline for this pattern is around 5350 -5300. Therefore if the market closes below 5600 (on weekly basis) the next target will be 5350. But looking at the larger patter I believe that there is extremely high probability that the support of 5300 will be broken.
Nifty Weekly Chart
If 5350 is broken the most likely target for Nifty will be 4700 which is the target for the pattern. As I have marked in the third chart
Nifty Weekly Chart
The most likely scenario which is going to be played form the current levels as per my understanding is that market will crack to 4700. If a person wants to go short he can go short if the market closes on Friday below 5600. With a stop loss of 5850 and target of 5350 and if 5350 is broken the next target will be 4700.
Readers should also keep in mind that there is alternate scenario which is forming right now. In the chart we given below we can see that Nifty is also forming a inverse head and shoulder pattern which is inherently a bullish pattern. If nifty fails to close this week below 5600 than there are high probability that market may bounce back and break the trend line which is near 5850. The most likely target for any break of trend line will be 6500.
Nifty Weekly Chart
To summarize my post, If nifty closes below 5600 the most likely target for nifty would be 5350 and 4700 (if 5350 is broken). I will give 70% probability to this scenario.
The alternate scenario is that market will fail to close below 5600 (weekly basis) and it will move up and break 5850. In that case market can go up to 6500.
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