Sensex begins gap-down, but holds last week's lows

We expected weak open, but were watching last week's low. Hitting opening low exactly at 17856, against last week's low of 17855, Sensex found an immediate support. Recovering 148 points, it hit a high of 18005, before shaving off the initial gains. Index finally ended marginally negative. While most other sectors also closed flat, FMCG had lost 1.4%. The A/D ratio also ended marginally negative. The action formed an indecisive, Doji-like candle on Sensex and Inverted Hammer on Nifty Future chart. While it indicated resistance near 18K on upside, it avoided breaking the crucial last week's low at 17855.

On the upside, however, day's high of 18005 retraced last week's fall (from 18167 to 17856) by 50%, which is still indicating corrective nature of the moves after the initial fall. On Intra-day chart, corrective phase looks like a sideways / ranged action since last Thursday, visually looking like the Right Shoulder of Head and Shoulders formation.

Break below 17855 would also threaten the 0-b line for the a-b-c formation inside the "i" leg. (shown in Blue color on the 30-minute chart above), which would provide 1st stage of confirmation that a-b-c pattern is over. The 2nd stage of confirmation needs complete retracement of its "c" segment, i.e. drop below 17374.

According to wave logic, if the attempt to hold las...