The DJIA has broken out of a reverse Head & Shoulder pattern on the weekly chart last week coinciding with the generous 50 bps cut announced by Fed last Wednesday. Nasdaq and S&P have simultaneously given a breakout of a 1-2-3 bottom pattern that formed over the past 10 weeks. Charts below.
Fig 1 - Weekly Chart of DJIA showing a Reverse Head & Shoulders breakout
Fig 2 - Weekly Chart of SPX showing a 1-2-3 Bottom breakout
The Indian markets too continued with their unrelenting run by scaling all time highs. The Nifty has broken out of a tight 5 day consolidation zone displaying strong bullish momentum last Friday. In hindsight, it appears like a cup and handle pattern, with the handle almost like a straight flag like formation. BankNifty has broken out to all time highs from a rounding bottom formation. CNX IT formed a bearish double top pattern which has shown signs of failure on Friday, suggesting a sharp reversal.
Fig 3 - Daily Chart of Nifty showing a breakout from a cup and handle pattern, with the handle resembling a flag like formation
Fig 4 - Daily Chart of BankNifty showing a breakout to all time highs in a rounding bottom formation
Fig 5 - Daily Chart of CNX IT showing a double top formation with Friday's candle forming a bullish harami, suggesting a sharp reversal.
However the European heavyweights FTSE, CAC, and DAX, have failed to match the exuberance on Friday, reversing sharply from the gain made on Thursday post the Fed announcement. The Asian markets are a mixed bag.
Overall, the US markets with fresh breakout signals on the weekly charts, are likely to lead the way for the global markets to rise northwards. The Indian markets also seem poised to continue marching northwards if one goes purely by the technical signal on the charts.
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