Member's Post – Inverted head and shoulder Nifty (India)
In the current scenario Nifty is forming an inverse H&S near the support of 200-SMA, which means that if Nifty manages to hold the recent low of 4675 and breaks above the neckline valued at 4930, a rally of 1000 odd points in Nifty from thereon within a quarter or two will not surprise me.
Dharmesh Patel
Author: Orpheus | Date: 28 February 2010 | Comments (3)
Categories: News, Reader's contributions
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I feel this graph is one day old, on Budget day there was a breakout above 4930 already but closing has come below that. Line graph shows a better picture here, volumes fell during the formation and typical sudden jump on budget day.
Difficult to agree with this imagination. Reasons:
1) Even if it would be a HnS, which it is not and I come to that later, the TARGET would be (value of neckline at the occurence of the Head – value of the head)+ Level of neckline breakout = (4944-4667)+4914 = 5187. WHERE are you getting a 1000 point move from?
2) All structures that “look like” head and shoulders are not Head and Shoulders. Volume must expand under the right shoulder. In this case the highest volumes were right under the Head and the volume under the right shoulder was not higher than under the left shoulder. On the breakout a volume expansion has occured. So this whole pattern is suspect.
3) The best places and the most typical places for occurences of HnS is in five wave structures (that includes C waves within larger corrective patterns also). The swing up from the 4647 lows has too many intraday overlaps to be anything but a sequence of abc-X-abc making the odds of a HnS occuring to be very very low.
We occasionally publish what readers feel about the market. Even if the view is contrarian to the Orpheus view. We look at the ongoing upmove as a complex corrective like you Sushil. A deep up retracement challenges every bit of preferred negativity. Above 5,000 prices also push above previous iv wave resistances and key Fibonacci resistances. Regarding head and shoulder, we see it simply as a high – low Dow Theory structure. We won’t like to be standing negative above 5,000 psychological levels. If prices have to turn they should now. Otherwise a retest of previous highs or new highs, the case made by Dharmesh remains valid.
Thanks for the post