The chart above indicates that Sensex has corrected very well, retracing exactly to test the 61.8% Fibo level from 8000 to 21000. 61.8% Fibo is an extremely critical retracement level, as most corrective waves of bull runs in financial markets form a bottom at this key scientific level. Having said that, if price remains under this 61.8% (in our case 12800) then the implication would be that price could retrace 100% - meaning if SENSEX remains under 12600-12800 then a fall to the start of the bull run namely 8000-8500 would seem increasingly probable. However immediately a good recovery may be underway towards the falling trend line resistance at 15000-15500 (see chart below).
For a clear confirmation that the corrective wave is done and over with and the SENSitive indEX is out of the woods, it would initially need to cross the 16350 hurdle followed by the 18000 mark to embark on its next bull run.
In the forthcoming days, it would be interesting to see if the recovery manages to break above the falling trend line, because failure to do so would spark the first signal that a deeper downside attack awaits the Sensex.
In the forthcoming days, it would be interesting to see if the recovery manages to break above the falling trend line, because failure to do so would spark the first signal that a deeper downside attack awaits the Sensex.
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