RELIANCE - PRICE TARGET 600 (LONG TERM)

RELIANCE

Let me introduce you first with this chart. It is monthly chart study on semilog scale. It is often not permissible for wave analysis. In order to describe the past 14 years, I am forced to break some rules. Still I tried to keep the scale reasonable above 600. Semilog scale can only change the beauty of chart but levels and wave pattern remains unchanged so readers should not be concerned a lot about this.

Coming to my point, I was bearish on this stock from real long time; you can say that I am bearish from 1000 or 1100 or even at 900. Look at the above chart which has ranging diagonal triangle. This consolidation run for nearly 2 years or say 24 months. Then we have seen break down of this chart. Break down price was 870-865 levels.

If I assume that current wave has generated from the higher levels of triangle then also we have not seen the completion of wave form. So fall is looking to be very obvious.

·        It has life high at 1649 and we have seen correction up to 465 in year 2008 fall. It was 59.60% which is roughly near to 61.80%. It is showing that this stock is known to have reaction of nearly 61.80% of any trending wave.

·        After choppy and consolidating moves we have seen first down wave from 1166 to 712, which is 454 points of fall.

·        Then we have seen corrective upside from 712 to 905.

·        Fresh wave is the down trend with break down. Price has corrected from 905. 38.20% (of 454 points) fall will end up at 731.

·        Any extension of this fall will cause a price correction up to 61.80% (roughly). This is giving me – ((905 – (61.80% of 454)) = 624, which you can say panic fall of fifth wave.

·        Worse case – will be 100% of 454 of actionary fall of 454. It will end up at 454, which will be near to previous low.

Application of wave theory is tough job. One must know that retrenchment and the study of retrenchment is not easy to apply. I tried my best to conclude but I may not be 100% correct. Also note that wave formation changes with time but may not be frequently.

Regards,

Praveen Kumar