It has been observed by the Analysts that any pattern up or down is revered after a terminating pattern that is observed in the Index. If we look at the image below it would be much clear what I am talking about.
In the image you would see 3 boxes which shows us the classic case of terminating pattern.
Now as you may have heard in the TV channels we were in the bull run for the last five years and so what we saw in that bull run is a correction and each of those correction ended only after showing terminating pattern.
In box 1 and 2 we see that we have no direction as far as Sensex is concerned. It goes up one day and down the other such oscillation in bull market leads to break out in the higher direction.
In box 3 we see that our bull run is showing sign of termination and so it took quite a long time for that pattern to revers and so there is larger time frame after which the trend reversed.
Similar things are observed in the downtrend these days where Sensex gains almost 700 points on one day and looses the same the very next day and then closing above 13800 would suggest the trend reversal as well as 12900 would suggest the downtrend to continue. So lets see which is the level comes first and is violated.
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