Wednesday, February 10, 2010

Markets in Correction

[I have returned from a week long holiday. I thought I will be able to keep my blog updated during the holiday, but it was not possible.]

The Nifty joined world markets in a correction of the up move. While the media makes it sound like a catastrophe, the decline is not unusual. All markets correct, we just do not know 'when'.

Whenever a correction begins, two questions come up: (a) How can we say this is a correction and not a reversal of the trend, and, (b) If this is a correction, then how do we determine its end? The end of a correction is the start of the original trend, therefore a perfect entry setup.

I will attempt to answer these questions in subsequent posts.

5 comments:

men said...

Mr. Sudarshan, during your holidays did u ever bother about the markets? or were u completely away? if it is the latter then congratulations. Among everyone I know, me included we just think about the markets 24*7, m trying hard to forget but just cannot.
Regards,

prabhakar said...

Dear Mr. Sudarshan Sukhani,
Welcome back. It was a dull week without your words of wisdom on TV and here, your stock recommendations apart.
Prabhakar

Viral Rajnikant Dholakia said...

Dear Sir,

If possible answer my this interesting query:

We know how to interpret a Triangular Breakout. But, what i would like to know is what to do when we have an opposite pattern.

What if triangle is in formation from other side. The tapering end comes first & than we have higher top & higher bottom in follow-up of narrow tapering triangular apex.

Is there any pattern/indication for such formation? Thank you. Apologies if the query is a bit too wierd to reply to.

Viral Rajnikant Dholakia said...

Such reverse-triangular patterns are often frequented during intra-day sessions.

So, wanted to know, whether they are some form of clue of any kind.

arvind said...

I think the reversal in trend comes first, later on we give this reversal name either a correction or continuation of main trend.

It all depends on scale of measurements one can imagine. if we are imaging it in larger scale of charts, it can last for larger price movements, but it always follow a pattern, and each pattern has its own limitation and boundaries, beyond this the definition of bull and bear market enters in.

Patterns can be recognized as head & shoulder, triangles, flags etc or as flat,zigzag,regular,irregular and or the combination of all or any of these. which can be identified by visualizing the technical charts.

one can say the trend reversed back only and only when it breaks one's support and resistance levels (swing high or swing low).or fulfill his valid reason to touch above levels.

we can project fibonacci relationship to find the target of said correction or continuation of main trend. when pattern seems at near completion, nearest swing high and or low can give us better and perfect entry.

rest sir please you explain