Wednesday, June 18, 2008

Is the Bear Market Over?

Dear Friends,

What a nice up move shown by Nifty today !!! This up move has made a lot of people to think whether the downtrend is over and are we in a new bull phase?

Well, As I have been posting here for so long the charts showing a Bear Market, my views are still intact. I've attached EOD chart of Nifty (see the lower chart) with only three trend lines :

Line 1 - The uppermost Down Trend Line, starting from Jan High (all time high)
Line 2 - The second Down Trend Line starting from 4th Feb High.

Line 3 - The Latest Support line in this downtrend starting from Jan low.

As you can see the Line 1 is still too far away. So let us see the Line 2. Today Nifty managed to almost touch that line, which should act as a good resistance for Nifty even tomorrow. The level comes around 4670-80. Given the volatile Global Market Conditions, this res can be taken out overnight. If Nifty opens above 4680 tomorrow and moves up, then there are good chances it can go further up.

The Line 1, although looking a little too far right now, level being above 4900, will be a BIG resistance IF IN ANY CASE Nifty manages to go there. To remind you all, Line 1 if taken out will mean the current Bear Market is in danger. But for me, the chances of that happening are almost not there. The reason is there is no fundamental support coming in the near term.

The Line 3, which was breached just few sessions back, has been restored for the time being. The slope of this line is not much and so the level is still there about at 4500.

The points to be noted here, as my friend Vivek Marne puts it, today's move of Nifty halted at 38.2% retracement of the down move from 5167 to 4369. AND the 61.8% retracement of this down move comes coinciding with the Line 1 !!! (see the upper chart)

As we can see, at this juncture Nifty is around in the middle of the range between 4500 to 4900. There are all the possibilities that this up move proves to be merely a Bear Market Rally, which will fizzle out as sharply as it came.

For those who think Nifty has found bottom, just think two points :

1. The up move is a more or less a V - shaped rally, which is not a good sign for bulls.

2. The volumes are not supporting the up move, a BO by definition happens when volume supports price action, which is not here.

So friends, All in All, I look for shorting opportunity rather than playing on the upside - After all, the Trend is best friend and At this time the Trend is DOWN.

Disclaimer: Same as earlier - Do not trade on my recommendations...

Thanks & My Best Regards
Harish Dobhal

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