Trading the Descending Triangle in BSE Sensex

Traderji

Super Moderator
#1
After staying above its 50 day moving average since the beginning of this bull market (May 2003) the Sensex has lately been zigzagging below and above it.

What does this mean and indicate to us? What kind of signal is the market giving us!

The trend is currently sideways and the market is in a correction/consolidation phase.

The IT, Tech, Consumer Durable and FMCG Indices have all began intermediate downtrends.

The Healthcare, PSU, Capital Goods and Bankex index are in intermediate uptrends or are holding on to their support levels.

Over the last 3 months the Sensex has been forming a Descending Triangle Pattern.

The descending triangle can signal the reversal of an uptrend in the market being charted. It is formed when a run up in a security's price levels off and is followed by a series of lower highs and relatively equal lows.

As you can see in the chart, a trendline was drawn connecting the descending peaks, and another line connecting the valleys. These lines were extended to the right until they formed a descending triangle. Volume, typically heavier at the beginning of the pattern, decreases as price moves toward the apex and then increases during the breakout.

The minimum number of lows and highs required to form the descending triangle, or any triangle for that matter, is two of each, for a total of four. The descending triangle is referred to as a right-angle triangle because if a vertical line is drawn at the open end of the triangle, a right-angle triangle is formed. If this pattern were followed by a breakout to the downside from within the triangle formation, it would be a triangle top. Or if the price breaks out to the upside, it would become a continuation pattern rather than a reversal.

The successive lower highs forming the descending side of the triangle indicates more aggressive selling than buying. It indicates that sellers are willing to sell at lower and lower prices.

The flat line or the base indicates that buyers are holding their ground and willing to buy whenever the market corrects itself. In the attached this levels for the Sensex is 5550.

If the market breaks below the 5550 level we could see the Sensex sliding all the way to 5000. Alternatively on a upside breakout we could see the maket testing its previous top of 6250.

What would I do then?

Wait patiently for the market to make its next move based on the levels mentioned above.

Keep watching this forum for the next update!

Traderji
 
#2
very good analysis what do we do normally in side ways mkt
shd we do trading at all
can we go short at hid\gher levels
in side ways mkt does it give any signals abt directyon
paddy62
 

MurAtt

Well-Known Member
#4
Can Traderji or someone else for that matter please post the chart with the markings ... do not have data at home comp ...
 

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