Archives : GLOBAL FACTORS FORCE THE MARKET TO CORRECT - 22/01/2010

GLOBAL FACTORS FORCE THE MARKET TO CORRECT - 22/01/2010.

CHINA, L&T, OBAMA TRIGGER SELL-OFF. 

BELOW 50 dma. 

TECHNICALLY SPEAKING. 

INDEX LEVELS: 

LAST WEEK’S RECOMMENDATIONS: 

THIS WEEK’S RECOMMENDATIONS:


GLOBAL FACTORS FORCE THE MARKET TO CORRECT - 22/01/2010.

  • CHINA, L&T, OBAMA TRIGGER SELL-OFF. 

Weak global markets helped our market to break the critical support zone of Nifty 5180-5152. The main worry was the ease with which the support zone was broken. It seems that the liquidity tightening measure adopted by China triggered a sell-off in our market and it was ably supported by weak result by index heavy weight L&T. This brought down our market as we broke all critical supports on Thursday.

 U.S. investors overwhelmingly see President Obama as anti-business and question his ability to manage a financial crisis. Obama has been in a “constant war” with the banking system, using “fat-cat bankers and other misnomers to describe the financial system in the U.S. He has proposed a fee on as many as 50 large financial firms and yesterday called for limiting the size and trading activities of financial institutions as a way to reduce risk-taking. The Financial collapse in the U.S. is just over a year old and they are still not out of the woods, so it will be better if he stops unnecessary tinkering with the financial markets in the U.S.

  • BELOW 50 dma. 

In the process our markets also managed a close below the 50dma, thus changing the short to medium term trend from up to down. As a result the market opened with a gap down on Friday, but staged a good recovery as Sensex closed about 250 points and Nifty around 80 points from the lows of the day. Even as indicators are signaling weakness ahead, the formation of a hammer on Friday supports some sort of minor upmove. The critical test of the market will be when the 50dma (Sensex – 17166 and Nifty – 5118) will be tested. Global markets will play very important role in deciding whether our market surpass this resistance level or not. Till then every rise will keep attracting shorts.

  • TECHNICALLY SPEAKING. 

The Sensex opened the week at 17554, made a high of 17712, a low of 16608 and closed the week at 16859. The Sensex closed the week with loss of 695 points, thus registering a weekly big black body candle. Similarly Nifty opened the week at 5252, made a high of 5292, a low of 4954 and closed the week at 5036. The Nifty too closed with the week with a loss of 214 points and in the process registering a big black body candle.

 

The downfall this week was already signaled during last week when the Sensex formed a Bearish Hanging Man formation on the weekly charts. This led to bearishness during the week. Both Sensex and Nifty formed a hammer with a black body on Friday, which gives a ray of hope for the bulls.

 

The Sensex has fallen with falling gap between 17000 and 17025 on Friday and this gap should act as a resistance.

 

Both Sensex and Nifty have given a Bearish Rising wedge breakout. The targets for the Sensex are 15714-15373 and Nifty 4684-4587. These targets are valid as long as the Sensex remains below 17246 and Nifty below 5215.

Both Sensex and Nifty are currently held by the Trendline joining the higher bottoms of Sensex 13219-15330 and Nifty 3918-4538. Both have just about managed a close above the Trendline support which is also coinciding with the 100dma (Sensex – 16812 and Nifty – 5003). Bulls will hope that this support holds, for them to stage some sort of a fight-back.

 

Since the indices have managed a close below the 50dma, the short to medium term trend has turned down. The long term trend is still intact as the higher bottom formation has not been broken in both the indices. The long term trend will reverse when the Sensex breaches its higher bottom at 15330 and Nifty 4538.

 

Nifty OI PCR is at 1.07, which is not giving much confidence to the bulls. Call writing is visible at 5300 strike in Feb series and Put writing is seen at strike of 4900, 4800 for the Feb series. Hence one can presume that the market is likely to find difficulty in crossing 5300 on the higher side and will find support at 4900 and 4800 on the lower side in the short term.

 

The Trendline Resistances for Sensex are at 17094-17246. Trendline Support is at 16078.

The Trendline Resistances for Nifty are at 5137-5215. Trendline Support is at 4751.

 For the week ahead, Sensex will face Support at 16210-16577-16777 and will find Resistance at 17025-17195-17494. For the week ahead, Nifty will face Support at 4851-4933-4995 and will find Resistance at 5079-5113-5179.  

  • INDEX LEVELS:
 S3S2S1CLOSER1R2R3
Nifty4851493349955036507951135179
Sensex16210165771677716859170251719517494

  

  • LAST WEEK’S RECOMMENDATIONS: 

It was a superb week for our readers as almost all the targets were reached except for Century Textiles.  

STOCKReco. PriceTgt ReachedLot SizeProfit
Buy BEML120712461275375Rs.25,500
Buy Neyvelli1691761771475Rs.11,800
Buy FinTech162016871723150Rs.15,450
Buy CenTex587605596848Rs.7,632
Buy TCS7918228291000Rs.38,000
    TotalRs.98,382

  • THIS WEEK’S RECOMMENDATIONS: 

This week the market is likely to be very volatile and hence one can adopt a pair strategy approach.  

PAIR NO.STOCKCMPSLTGT - 1TGT -2
1SellReLInfra105810841033992
BuyBhel2380235124242463
2SellTataSteel624635610591
BuyStrides297287309325
3SellUltraTech912932888865
BuyBRFL214209222228
  
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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