The markets have been in a free fall over the past few weeks and a lot of portfolios have taken a beating. The entire rise from 5350-6339 has been retraced and we are having some serious corrections. Lets look at some technical parameters.
1. The entire up move from 4786 - 6339 has been retraced almost 76 pc. This means that eventually 4786 is likely to be broken, as very rarely do markets retrace 76 % and then bounce to take out the previous highs. For me, the validation would be breach of 5100.
2. The 5 month low ema comes in at 5416 and the 5 week low ema comes in at 5429, expect this zone to provide some serious resistances. The 5 month low ema has been very rarely breached and this could be an indication that we are in for tough times ahead.
3. The trend line resistance for this leg of fall comes in at 5450-5470 over the next week. Breach of this trend line could open further upsides.
4. The Bollinger Bands indicate that a bounce has taken place above the lower band.This means the third wave of the fall could have culminated on Friday.
5. This fall has had 3 waves till now.
Wave 1 from 6178 - 5624 = 554 points
Wave 2 from 5624 - 5802 = 178 points
Wave 3 from 5802 - 5178 = 624 points
Wave 4 is ongoing.
The invalidation point for this is 5624.
6. The 5-day high ema has never been breached on a closing basis in this fall. This comes to 5363 for Monday.
Monday will see some kind of bounce thanks to the Egypt crisis being resolved. It could be an opportunity to take profits off the table for positions created at lower levels. The region 5410-5470 has a multiple of resistances coming.