Sensex outlook bearish for short term

Sensex losing nearly 1000 points in the last two trading sessions on 27th and 30th June 2008 has confirmed a bearish market outlook in the short term. Market closed below 15000 at 14889.25 for the first time since March 2008 on 10 June 2008. This is a triangle break out at the bottom side witnessing strong bearish trend thereafter.

The triangle formed on the daily chart has the top declining line touching at 18683.16 (04 Feb 08), 17600.12 (02 May 08) and 17434.94 (16 May 08). The rising bottom of the triangle touched at 14809.49 (17 Mar 08) and 15514.79 (04 Jun 08). The triangle break out occoured on 09 Jun 2008 when the market opened on the lower side with a gap of 450 points from the previous day's close of 15572.18. The break out point of the triangle is at 15560, while the market opened on 09 Jun 2008 at 15115.97 and closed at 15066.10. This break out is again confirmed to be strong when the market tried to push above the bottom line of the triangle at 15696.90 and failed on 17 Jun 2008. The bottom line of the triangle as shown in the image here would serve as a strong resistance before the market turns bullish as the sensex value is well below this line now.

Sensex forecast for July 2008 revolves around the above formation on the daily chart. If you go by the techical analysis rule, the triangle break out has the potential of moving the market along the direction of break out to the extent of tallest portion of the triangle, from the point of break out. In this case the tallest portion of the triangle is between 18124 (top) and 14809 (bottom) having a difference of 3315 points. Therefore the market is expected to move 3315 points downwards from the point of break out of 15560, setting a target of 12245 at the bottom side for the short term range during July 2008.