Therefore, immediate rallies will be interpreted as corrective in nature as long as the medium-term technical parameters are positive. The recent uptick in the Sensex since the 12514 points drop has been sharp. On July 23, 2008, the gap above formed a sharp island reversal gap between 14510 points and 14519 points on the daily charts.
In general, its impact on the medium-term outlook will be very positive, especially since the island includes 22 business meetings. When a stock indicates an uptrend, trades above the gap that occurs, then the gap moves back down and trades below the initial price, an island reversal has occurred.
However, the Sensex has since touched a strong resistance zone between 15026 points and 15390 points. The monthly average for June 2008 is at 15026 points. The 50% decline from May 2008 (17735 pts) is at 15124 pts. positive effects of beaulish The island’s reversal gap will be rejected if the Sensex closes below 14104 points on a daily basis (ended on July 22, 2008). The Sensex is then expected to have an initial low of 13513 points, a 61.8% Fibonacci retracement of a recent rise from 12514 points to 15130 points.
If the bearish island reversal gap of 14484-14568 pts is filled immediately and Sensex manages to decisively reset the resistances between 15130 and 15390 points, then the ongoing upward movement will continue. Sensex may again test higher levels between 16618 pts and 16860 pts.
The 78.6% Fibonacci retracement level of the decline from May 2008 is at 16618 points while 16860 pts is the 50% retracement level of the total decline from the January 2008 high. Therefore, one would wait for further confirmation before changing the medium-term outlook to positive.
(The author is a technical research assistant at Darshaw)
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