Archives : 4820-4770 - Strong Support Band - 25/09/2009

4820-4770 - STRONG SUPPORT BAND – 25/09/2009. 

The market gave a scare on Wednesday when it fell dramatically. The fear was more accentuated by the expiry which was on the next day. Since the month of September was very heavy, the rollovers to October seemed difficult. But however on Thursday the market opened with a gap down, but managed to take support and bounced back due to short covering and closed higher and the rollovers were taken care of.

 


OCTOBER WORRY. 

History suggests that the month of October is quite unstable and volatile for the stock market. Last year in 2008, the second leg of the major fall of the bear market was triggered in October and the market dropped dramatically. According to our time study, the month of October matches our time period for any sort of market reversal that may be lurking around the corner. This is not to say that the market will undergo a correction, but there is a possibility. If one is to take in to consideration the one way rise from Sensex 7697 and Nifty 2252, then the market has almost doubled in a short span of six months. Such a meteoric rise is difficult to sustain and needs some correction before resuming further upward journey. Please remember that the correction will not change the trend of the market but will only make it more powerful for further upmove.

 

ROLLOVER RELIEF. 

 

Since there was huge open interest in the month of September series, the rollover was giving jitters to the market participants. However the bulls managed to save the day as the market wide rollover was above 77% as compared to an average of 75% over the past few months. Also the Nifty rollover was quite good at 70% as compared to an average of 66%. Sectors such as Infrastructure, Banking and Pharmaceuticals saw strong rollovers to the next series. Stocks like India Infoline, Vijaya Bank, Uco Bank, HCC and IVRCL Infra saw very high rollovers of around 90%.

SENSEX. 

The Sensex opened at 16805, made a high of 16943, made a low of 16494 and closed the week at 16693. The weekly loss was 48 points.

 

The Sensex has made a Doji on Friday in the daily charts. In the weekly charts it has made a Spinning Top which is a neutral formation. This clearly indicates that the Sensex is now searching for direction and next week will provide that answer.

 

The RSI (65) is moving down and so is the momentum indicator ROC, indicates the loss of momentum. However the ROC is still in buy mode and so is the MACD. The only major point of concern is consistent divergence seen in Money Flow Index.

 

If the market retraces some more before bouncing back it will be very healthy. The Sensex has strong support at the Trendline joining the low from 8047 to 13219. The support was held despite being tested several times. This Trendline support is currently at 16161.

 

If the Support zone of 16161 on Sensex is broken then, the minimum the Sensex will correct will be the rise from 14684-16943 and the correction levels will be 16080-15813-15547.

 

If the market overcomes the supply at higher levels and move higher then the Sensex will go for the targets of rising wedge breakout which are placed at 17265-17737.

For the week ahead Sensex will face resistance at 16943-17265-17521 and support will be at 16494-16119-15907. 

NIFTY. 

The Nifty opened at 4977, made a high of 5034, made a low of 4904 and closed the week at 4958. The weekly loss was 18 points.

 

Nifty has formed a small black body on Friday which tries to look like a Hammer but is not a Hammer as the lower shadow is not long enough. The Doji formed on the weekly charts indicates indecision on the part of Nifty, whether to go up or down.

 

The RSI (65) is moving down and so is the momentum indicator ROC, indicates the loss of momentum. However the ROC is still in buy mode and so is the MACD. The only major point of concern is consistent divergence seen in Money Flow Index.

 

If the market retraces some more before bouncing back it will be very healthy. The Nifty has strong support at the Trendline joining the low from 2539 to 3918. The support was held despite being tested several times. This Trendline support is currently at 4820-4770.

 

If the Support zone of 4820-4770 on Nifty is broken then minimum the Nifty will correct will be the rise from 4353-5034 and the correction levels will be 4775-4694-4614.

 

If the Nifty overcomes the supply zone of 5003-5034, then the Nifty will try and achieve the targets for Ascending triangle breakout which will be 5103-5351.

 

The O.I.PCR has cooled down some what to 1.40. Strong CALL writing is seen at 5000 and 5300 strikes, which should act as resistances. Similarly, the strikes of 4900 and 4700 are seeing lot of PUT writing and hence should act as good supports.

For the week ahead Nifty will face resistance at 5034-5103-5148 and support will be at 4904-4824-4770.  

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4770

4824

4904

4958

5034

5103

5148

Sensex

15907

16119

16494

16693

16943

17265

17521

LAST WEEKS RECOMMENDATIONS: 

STOCKReco. PriceTgtReachedLot SizeProfit
Buy REL124312791261276Rs.4,968
Buy Adlabs362374368600Rs.3,600
Buy Maruti163916831688200Rs.9,800
Buy Grasim281128622864176Rs.9,328
Buy IVRCL 3793913911000Rs.12,000
Buy RPower1721791752000Rs.6,000

THIS WEEK’S RECOMMENDATIONS: 

STOCKCMPSLTgt-1Tgt-2
Buy Educomp4448436145904791
Buy Patel Engg.514492544590
Buy Sun Pharma1308128413311369
Buy Glaxo Pharma1576152916291663
Buy KS Oil69677581

WATCH OUT FOR:

Educomp

Patel Engg

IBReal

IDBI

Balaji Tele

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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