We have had an exciting week full of wild intraday swings. Let us now see how we stand on weekly basis. The weekly chart below shows that our pullback stalled at 23.6 percent retracement, approximately at 3240 (drawn in red) calculated from point B to C marked on the chart (this ABC marking has nothing to do with any Elliot count, lest some people scream at me for getting the wrong wave count!). We have also closed below the critical 61.8 percent retracement, approximately at 3030 (drawn in blue) levels drawn from early 2003 to the top of Jan 2008. So what does it tell us? Well the broader range for now is defined as 2850 and 3250. Though 3025/50 is an important level, we really need to take out 3250 if we want to be ambitious enough to test the upper channel line at 3650/700! Anything below 2850 will put the bulls on a back foot and put pressure on 2650/2600, where I feel lays the make or break of this rally or pullback as some prefer to call it!
On the Daily chart below we have a 2 bar reversal of sorts, see the last two bars! Another interesting point is that we have retraced to 38.2 percent of the current rally and held to it for the last two days. The nearest 20 period MA is critically poised at 3030 levels approximately and is bound to provide some resistance, above that again the channel line resistance will stare at us at 3150. Keeping up with our step by step approach, let us first surpass these levels before we get talking again!
The hourly chart shows the nice double bottom (our 2B reversal on the daily), and the price is nicely nesting upon the two converging 20 and 50 period MA’s ready to take a short at then 200 period MA overhead. This a sort of convergence of strong supports; a double bottom at 38.2 percent retracement, two MA’s lined up, this should hold nicely till proven otherwise. Remember that Technical Analysis is all about probabilities!
"You will become as small as your controlling desire; as great as your dominant aspiration."
James Allen
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