Is Sensex Making a Double Top?

The broader market indices are clearly in an uptrend and that too a strong one. The small and mid-cap spaces are also giving their full contribution to uplift the sentiments of investors. However, looking at the daily chart of Sensex , it seems like some selling pressure might be on the cards in the near future.

This analysis is based on an extremely short-term move, and therefore there is a likelihood of it going wrong. On 15 September 2023, Sensex made a high of 67,927.63 and closed the session 200 lower at 67,727.53. In the next session, the index fell even further by 241 points but more importantly closed below the previous day’s low.

Image Description: Daily chart of Sensex (spot)

Image Source: Investing.com

This is an important piece of data because this price action has occurred for the first time after 31 August 2023. This was the date when the market finished its correction phase and rallied one way to make a new all-time high. In short, during this entire rally, the index never closed below its previous day’s low, except on Monday.

If you zoom out the chart, you can also see a probable double top in the making as the previous top had been made around the same level, at 67,619.17 back in July 2023. Although it is too early to call it a double top, the selling pressure is visible.

Another hurdle that will likely put pressure on the indices is the relentless rally in crude oil prices, which are now hovering around $95 per barrel ( Brent ), the highest level in over 10 months. The consequent result is a fall in the rupee against the US dollar which is trading at around 83.2.

All in all, the trend in the broader indices is positive, however, traders at least should tighten their stops to protect a good chunk of their notional profits on long positions.

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