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'Mkts may not go beyond 11,750-12,020 levels'

August 17, 2006 09:02 IST

Technical analyst S L Joshi tracks the Indian markets using the Elliott Wave Theory.

Joshi informs that according to the longer-term charts, the Indian markets are currently in Wave Three. He expects the markets to be bullish in the longer term.

According to the Elliot Wave Theory, he believes that one needs to watch out for 11,750-12,020 levels on the Sensex.

Excerpts from CNBC-TV18's exclusive interview with S L Joshi:

What is the Elliot Wave Theory suggesting for the Sensex and Nifty next?

According to the longer-term charts, we are in Wave Three if we check the charts from a monthly basis right from 1980. So from 1980 to 1992, the market made one wave, we call it a Super Cycle Wave and its correction was almost upto 2000. Then the market broke out in the year 2000 and now the market is in Wave Three.

It has reached its upper targets but time wise it has not. So I expect Indian markets to be bullish in the longer-term. Each wave has its own internals so if we go into the point of view of weekly charts, we are coming into Wave Four. In Wave Four, we are a half-way through.

In mid-May, the market topped and then there was a severe correction. Now it is coming back and pulling upto a level of 11,750-12,020. From my Elliot Wave, these are the levels that we need to watch.

The only thing we are seeing is that the market is showing a little positive momentum. So at these levels, we should expect Wave C and a correction. Once that correction is over, we still have Wave Five to come, which completes one full part of the bull cycle, which had started somewhere around the year 2000.

What do you expect to see in terms of time?

Unless Wave Four completes, we cannot confidently say anything timewise. But if we compare Wave Two to Wave Four, it is more or less the same. Wave Two happened at the time when our previous government lost. But what we call as a rule of alternation, it was a simple correction. So I expect a little complex correction here. I do not expect market to go down below 8,800, which was a June low.

In the near-term, do you see the market going back to the old highs of 12,600 odd and breaking them?

We need to watch 11,750-12,020 levels. I do not think market will go beyond that level; we can say at these levels I expect the market to come down by another 1000-500 points.

Have you taken a look at any specific stocks from the front liners?

I track Sensex and Nifty stocks and most of them are showing similar patterns except for Bajaj Auto or Reliance Industries are in a kind of triangle and it looks like a breakout upside. But Hindustan Lever and ITC look weaker. But we have to see some more data to come and we need to move little more into the future to check.

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