Archives : OCTOBER SHOWS ITS TRUE COLOURS - 30/10/2009

OCTOBER SHOWS ITS ‘TRUE’ COLOURS 30/10/2009.

Finally the month of October showed its true colours as the market started the much needed correction. Even though everyone on the street was crying for correction and said that they would welcome a correction, but when it comes, it looks pretty ugly and scary. It takes lot of courage and conviction to buy in a correction, because there is lot of fear in the surroundings. October has started the correction; now let us see what November holds for the market.

In the last weeks article we had mentioned that the market is showing signs of tiredness and in this week the market came down strongly, confirming a short to medium term trend reversal. Both Sensex and Nifty had formed a strong bearish reversal pattern in the previous week called Three Black Crows at the top. This implies that the uptrend is over and a short to medium term down trend is in place.

 


OCTOBER SHOWS ITS ‘TRUE’ COLOURS 30/10/2009. 

Finally the month of October showed its true colours as the market started the much needed correction. Even though everyone on the street was crying for correction and said that they would welcome a correction, but when it comes, it looks pretty ugly and scary. It takes lot of courage and conviction to buy in a correction, because there is lot of fear in the surroundings. October has started the correction; now let us see what November holds for the market.

In the last weeks article we had mentioned that the market is showing signs of tiredness and in this week the market came down strongly, confirming a short to medium term trend reversal. Both Sensex and Nifty had formed a strong bearish reversal pattern in the previous week called Three Black Crows at the top. This implies that the uptrend is over and a short to medium term down trend is in place.

TREND REVERSAL. 

A short to medium term down trend is confirmed due to the following reasons.

  1. The long term Trend Line acting as a Support during the entire rally from March, was breached and signaled first sign of trend reversal.
  2. The formation of Three Black Crows on the daily charts on both Sensex and Nifty, confirmed a reversal of the ongoing uptrend.
  3. The ease with which the strong support zones for Sensex 16500-16700 and Nifty 4900-4940, were breached with strong increase in volumes confirmed a trend reversal.
  4. The close below the 50dma for both the indices confirmed an intermediate trend reversal.

The above points confirm a short to medium term trend reversal, but the long term trend still remains intact. From a ‘Buy on Declines’ market, we have become a ‘Sell on Rise’ market.

SENSEX. 

The Sensex opened the week at 16808, made a high of 16938, a low of 15805 and closed the week at 15896 thus forming a big body black candle on the weekly charts. The Sensex closed the week with a loss of massive 914 points.

The Sensex breached the 50dma on Wednesday and closed below it, signaling a short to medium term trend reversal. As a result the Sensex tested the 50dma on Thursday and Friday and came down because of heavy selling pressure. The long upper shadow on Friday indicates selling pressure witnessed after testing the 50dma.

The MACD & ROC along with OBV continue to remain in sell mode. The RSI (31) is nearing the oversold territory.

If we consider this fall to be a correction of the entire rise from 7697-17493 then the correction levels are 13751-12595-11439. In the immediate future if we consider this fall to be a correction of the recent rise from 13219-17493 then the correction levels are placed at 15860-15336-14852.

The Sensex has Trendline Resistance at 16661 and Trendline Support at 15610.

For the week ahead, Sensex will face Resistance at 16081-16297-16494. Sensex will find Support at 15610-15356-14852.

NIFTY. 

The Nifty opened the week at 4997, made a high of 5033, a low of 4687 and closed the week at 4711 thus forming a big body black candle on the weekly charts. The Nifty closed the week with a loss of 286 points.

 

The Nifty breached the 50dma on Wednesday and closed below it, signaling a short to medium term trend reversal. As a result the Nifty tested the 50dma on Thursday and Friday and came down because of heavy selling pressure. The long upper shadow on Friday indicates selling pressure witnessed after testing the 50dma.

 

The MACD & ROC along with OBV continue to remain in sell mode. The RSI (31) is nearing the oversold territory.

 

If we consider this fall to be a correction of the entire rise from 2252-5181 then the correction levels are 4062-3716-3371. In the immediate future if we consider this fall to be a correction of the recent rise from 3918-5181 then the correction levels are placed at 4699-4549-4400.

 

The O.I.PCR is dipping and is at 0.95 indicating the strength of the Bears. The strikes of 4900 and 4800 have seen lot of CALL writing and hence these levels will prove difficult to breach. The 4600 PUT has added lot of Open Interest indicating short term support at that level.

 

The Nifty has Trendline Resistance at 4793 and Trendline Support at 4711.

For the week ahead, Nifty will face resistance at 4793-4867-4934. Nifty will find support at 4630-4549-4400. 

INDEX LEVELS: 

 S3S2S1CLOSER1R2R3
Nifty4400454946304711479348674934
Sensex14852153561561015896160811629716494

LAST TIMES RECOMMENDATIONS: 

All our pair recommendations did exceptionally well as can be seen from the results below. 

PAIR NO.

STOCK

Reco price

Tgt

Reached

Lot Size

Profit

1

Sell

RIL

2047

1943

1922

150

Rs.18,750

Buy

Infosys

2260

2288

2299

200

Rs.7,800

2

Sell

Rel Cap.

873

829

722

276

Rs.41,676

Buy

M&M

927

962

969

312

Rs.13,104

3

Sell

Tata Steel

529

484

462

764

Rs.51,188

Buy

Hind Zinc

933

963

942

500

Rs.4,500

Total

Rs.1,37,018

  

 

 

 

 

 

 

 

 

 

 THIS WEEK’S RECOMMENDATIONS: 

STOCK

CMP

SL

TGT-1

TGT-2

Sell ABAN

1274

1312

1228

1190

Sell Siemens

515

528

497

477

Sell RIL

1931

1956

1900

1871

Sell HDIL

316

327

292

269

Sell ABNuvo

793

820

771

750

 

 WATCH OUT FOR:

Aban

 

 

 

 

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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