Sensex turns bullish for 2009

Sensex has seen a strong uptrend in the past one week and closed consistently above 10000 points in the last two trading sessions. The following developments confirm a bullish trend for Sensex in the short term:

• Strong close above 10000 points
• 20 days Weighted moving average (WMA) cutting the 50 days WMA from below (Refer Circle-3 in the image above)
• Triangular formation break-out at top (Refer Circle-2 in yellow in the image above)

Now lets measure the momentum of this bullish move. In other words what is the potential upswing that one can expect out of this bullish trend set to take off in the short term.

The triangulare formation holds the key. In technical parlence, the points forming the triangle are measured to calculate the potential movement from the point of break out. In this case the triangle formation can be considered to have formed with 11800 on top (Refer Circle-1 in blue) and 7800 at the bottom. Therefor the potential upside move is 4000 points from the point of break out. Roughly 9200 being the point of breakout (Circle-2) and the break out is on the top side, the market has the potential to move 4000 points from 9200 points. That fixes a target of 13200 points for Sensex in the near term (about 1 to 3 months from the date of break out).

While 13200 is only a target for the potential upswing, it is advised to book profit at every high touched by Sensex from the current position until it is a confirmed trend reversal with strong indicators for a prolonged bull phase above 14000 points.