In the last post we saw how the nifty has formed a running descending triangle and is on the verge of breaking down from it. In fact forming descending triangles during bear markets seem to be a speciality with the Indian markets since the 2008 top.
[A descending triangle constitutes a pattern where a series of lower highs alternate with a series of lows at the same level therby forming a contracting pattern with a downward bias. Both an Elliott wave pattern as well as a traditional charting pattern, it is a well defined continuation pattern.]
Check out the following.
The 2008 decline manifested in two distinct phases, the Jan-March 08 decline and the September-October 08 decline. These two phases were separated by a classic descending triangle.
As already shown in a previous blog, the 2011 bear market also formed a classic descending triangle on its way down.
The March-June 2012 correction also sported a contracting triangle which is almost descending.
And now we have this.
Please note that irrespective of the strength of the decline prior to the formation of the descending triangle, the breakdowns post the triangle have been quite furious (obviously in context of the size of whole bear market). In 2008 it was what one may call relentless and breathtaking. 2011 was also a torrid affair. No marks for guessing how I feel the current one will fold out.
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