By Hitendra Vasudeo, Technical Analyst : Until last week, the Sensex moved in a band of 9438-8631. After forming a low of 8631, the Sensex made higher low last week and crossed 9438. Last week’s close was also above 9438 with a positive weekly candle. In short, we have a breakout situation for an upmove within the internals of Wave e. What we discussed last week was that either we have ended Wave e or we are still into the internals of Wave e. If Wave e was terminated, then 9438 would not have been crossed. Since 9438 has been crossed, Wave e has unfolded into its internals.

Last week, the Sensex opened at 9359 registered a weekly low at 9329.23 and moved up to cross 9438. It attained a weekly high at 9724.87 and closed the week at 9634.74 and thereby showed a net rise of 333 points on a week-to-week basis.

Last issue’s headline was ‘Larger moves around the corner’. At that time, we were not sure on which side the large moves would emerge. If Wave e termination was confirmed last week, then it would not have crossed 9438 and a breakdown below 8631 would have been witnessed, which could have created a large move.

Alternatively, large moves were possible also on rise above 9438 for a rise towards 10,000 – 10,354. A breakout above 9438 was witnessed but large moves were not seen. A continued rise in the earlier part of this week may be seen before giving a clue to Wave e termination. A spike towards Sensex 10,000 – 10,354 is possible but sustainability at the higher range is still an issue.

Traders need to be alert and any trader trapped in long positions may have to pay a heavy price. Therefore, follow stop loss strictly. The importance of stop loss increases when the market is sideways and expectations and biases start to build up for either side movement. Any moves against one’s expectations could result into trapped positions over next few weeks.

The current Wave e is getting channeled up and can move towards the upper channel value and could even test the A-C trend line. The internals of Wave e appear to have unfolded. A fall and close below 9300 could probably violate the channel and could be the first alert for termination of Wave e.

Weekly support will be at 9562, 9401 and 9300. Weekly resistance will be at 9724, 9796 and 10192.

Yearly Outlook for 2009

As per the Yearly levels, Yearly Level 2 will be at 4294 and Yearly Centre Point will be at 12850. The Yearly level 3 will be at 18000.

Conclusion

The 9300 is crucial for the current leg.

Strategy for the week

Traders holding long positions must maintain a stop loss at 9300 for index based stocks generally. Sell on a rally to 10192-10354 with a stop loss of 10945 or wait for a rise above 10192 and when it falls on closing below 10192, then sell with high above 10192 as the stop loss or 10945, whichever is higher.

Source : MoneyControl

Tags: calls, daytrading, free calls, intraday, tips

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