Archives : GLOBAL WEAKNESS PULLS DOWN OUR MARKET - 07/05/2010.
GLOBAL WEAKNESS PULLS DOWN OUR MARKET – 07/05/2010.
 

MARKET TO TEST THE 200DMA.


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GLOBAL WEAKNESS PULLS DOWN OUR MARKET – 07/05/2010.
 
MARKET TO TEST THE 200DMA. 
The movement of the market in the past week was entirely dominated by the global markets. Besides that, Friday saw the most awaited outcome of the legal battle between the two Ambani brothers. All this made the market increasingly volatile and very difficult to trade for the traders, as the support levels got breached quite easily. Now the market is headed to test the 200dma.
 
GREECE CRISIS - TIP OF THE ICE-BERG.
The European debt crisis increases and promises that Greece may just be the tip of the ice-berg. The clouds are now gathering over the larger economies like Portugal and Spain, which have the power to destabilize the Euro and cause havoc in the global financial markets. Certainly the signs are now ominous as the FIIs who were net buyers in the Indian markets, turn big time sellers. Though the overall trend still remains intact, one can take the correction positively as there exists strong support at Nifty - 4800.
 
SUPREME COURT RULES IN FAVOUR OF RIL. 
The Apex court ruled totally in favour of RiL in a gas pricing dispute with RNRL, overriding the MoU between the two Ambani brothers. The Supreme Court held that the Government was the legal owner of gas and was the sole authority not only to fix the gas price but also the tenure and the quantity. This will definitely have a negative impact on the foreign investors, who will view the government interference in pricing and marketing of gas as a step backwards. While something was expected for RNRL, but nothing came through and it will have a great impact on RNRL’s business of gas distribution. RNRL had taken $2.3 as the base gas price for their projections, which will now go higher up to $4.2. This is a major setback for RNRL and even RPower, which was the eventual beneficiary and was supposed to receive gas from RNRL, at low price for its future projects. Now with higher costs, not only the projects will suffer but also the profitability and growth of ADAG power companies. The impact of the Supreme court verdict was clearly seen in the way the prices were impacted, while RiL moved higher by 4%, RNRL lost almost a quarter of its market price. Its advantage RiL and positive for the capital markets as well.
 
TECHNICALLY SPEAKING. 
The Sensex opened the week at 17536, made a high of 17536, a low of 16684 and closed the week at 16769. The Sensex lost a whopping 789 points on a weekly basis. Similarly Nifty opened the week at 5278, made a high of 5278, a low of 4984 and closed the week at 5018. The Nifty too closed with the week with a loss of 260 points. 
Both Sensex and Nifty have made a Bearish Opening Black Marubuzo on the weekly charts and that does not inspire much confidence going ahead in the next week. The pattern formed suggests that the bearishness is likely to continue in the immediate future.
Oscillators like the ROC and the MACD continue to be in Sell mode and are in negative territory. OBV and RSI continue with their Sell signals but the RSI is now 31 and will enter oversold zone anytime next week. Also the Stochastic Oscillator is in oversold zone suggesting that we might have some sort of pull-back from lower levels. The Directional Indicators have given a Sell signal as the –DI has moved higher than the +DI. The Bollinger Band had given a Sell signal on Tuesday and continues with the Sell mode. 
Last week we had mentioned that since both Sensex and Nifty have bounced from 17276 and 5160 respectively, the short term direction of the indices will be up as long as the bottom of 17276-Sensex and 5160-Nifty is held. If these levels are broken, the indices will re-enter short term correction. Also if the support zone of Sensex 17061-17027 and Nifty 5101-5092 is breached, then the medium term trend will be reversed. This week both the indices have breached the short and medium term support levels and closed below them and hence one can safely say that the short and medium term trend has turned negative. 
In the immediate future Sensex is correcting its rise from 15651 to 18047 and the correction levels are 17132-16849-16566. Similarly Nifty is correcting its rise from 4675 to 5399 and its correction levels are 5122-5037-4952. If the correction gets deeper then we will have to look at the correction of Sensex rise from 13219 to 18047 and the correction levels in that case will be 16203-15633-15063. Similarly one has to consider the Nifty rise from 3918 to 5399 and the correction levels will be 4833-4659-4484. 
Sensex is moving in a rising channel and the Trendline acting as the bottom of the channel falls at 15946. Similarly the Nifty too is moving in a rising channel and the Trendline acting as the bottom of the channel falls at 4800. These Supports are extremely critical and one can expect these supports to hold in the immediate future. Nifty OI PCR is at 1.18 and one can see tremendous Call writing at 5200 strike. Put writers are losing confidence as the 5000 Put has started shedding open interest and the activity has now shifted to 4900 and 4800 strikes. 
For the week ahead, Sensex will find Support at 16647-16494-16255 and will find Resistance at 16943-17195-17356. 
For the week ahead, Nifty will find Support at 4961-4913-4842 and will find Resistance at 5070-5137-5202.
 
INDEX LEVELS:
 
 S3S2S1CLOSER1R2R3
Nifty4842491349615018507051375202
Sensex16255164941664716769169431719517356
 
LAST WEEKS RECOMMENDATIONS: 
Despite such a volatile week, majority of our targets were reached except Fortis and BGR which just about missed their targets.
 
STOCKRecomm@TGTReached
Buy Fortis170177174
Buy BGR604625615
Buy RNRL707575
Buy LiCHsg955972976
Buy Tata Tea105310761076
 
THIS WEEKS RECOMMENDATIONS:
 
STOCKCMPSLTgt-1Tgt-2
Sell Bhel2382240723432298
Sell DLF284291273261
Sell HDFCBnk1848186818211783
Sell CentTex470482456440
Sell OptoCkt214217208203
  
WATCH OUT FOR:
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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