Sensex at a critical level...

In the continuing intermediate downtrend, the 13200 mark — a 62% retracement level of the previous rally of 12558 to 14222 — was breached on the downside. As a result, there is a high probability that we may see a kink in the index again to the level of 12500

Though this will form a triple bottom structure, rallies like the ones seen before, it may just not have the momentum to inspire confidence among bulls.

There can be two ways to deal with the situation. One is to start buying only when the trend has reversed. That is above 14000, if 12500 is not breached. If the 12500 is breached, one should start buying below the 11500 to 11200 levels with appropriate stop loss. Markets could turn before 11500 level but below 12500, we are in an uncharted territory. Hence, it is difficult to predict new supports.

The index attempted to rally yet again but this time, the bulls were stopped near 15000, just short of the intermediate reversal level of 15200 mark. These movements formed a bearish structure known as Head & Shoulders’, in just nine trading sessions. Hopes of a strong rebound diminished, when the sharp follow through rally fell short by 80 points from the level of 14300, which could reverse the intermediate trend.

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