>BRAVEHEART STRATEGY (SHAREKHAN)

"The second coming"
Prepare for wave two

October 2008 was the worst period for the financial markets globally. The financial meltdown that followed shattered not only large financial institutions but even countries. However one year down the line it seems that the financial Armageddon never occurred, as business become normal, people all the more optimistic and the overall social mood upbeat. But behind this facade there still remains the dungeon of doom where things are not all that hunky dory. Skeptics believe this rally, which has been driven by flush of easy money chasing returns, will ultimately dry up and suck the people of their wealth for some time to come. As per the Elliott wave theory, the Sensex rallied for wave 1 from March 2009 lows i.e. from 8047.17 to 15600.30 and started wave 2 in an expended flat pattern, where it has completed wave A and B, and wave C is about to start. So, the market is likely to correct for the target of 13200. On the weekly chart, the Sensex suggests weakness in the momentum indicator, KST, which has given a negative crossover and shows negative divergence too. The Sensex on the way up from 13219 has been taking support around 20 daily moving average (DMA) and 40 DMA, which will act as crucial supports. However, once we get a decisive break below these moving averages, the next leg in southward direction will gain strength and the bears would take over the control.

Bollinger band key reversal
The key resistance for the Sensex from here will be the upper Bollinger band, which is also the high of the current week. Hence, 17200- mark is an important level to watch out for because, if the market fails to sustain above 17200, the downside momentum will gain strength and the index will start traveling towards the lower end of the Bollinger band i.e. 13200.

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