Archives : WILL IT, WONT IT ??? - 09/07/2010
WILL IT, WON’T IT ??? – 09/07/2010.
 

TIME FOR BREAKOUT.

 

The million dollar question the traders are asking is whether the market will be successful in giving a breakout this time. The market has been experiencing range bound trading for almost more than three months and traders are now pleading for the market to give a breakout in any one direction. As the market once again approaches the upper end of the trading range, the traders are wondering whether we will be lucky this time around. Nifty is now within striking distance of the previous high at 5399. It seems our market has consolidated enough and though not all indicators are pointing towards an upward breakout, may be this time the market might not disappoint the bulls.

 

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WILL IT, WON’T IT ??? – 09/07/2010.
 

TIME FOR BREAKOUT.

 

The million dollar question the traders are asking is whether the market will be successful in giving a breakout this time. The market has been experiencing range bound trading for almost more than three months and traders are now pleading for the market to give a breakout in any one direction. As the market once again approaches the upper end of the trading range, the traders are wondering whether we will be lucky this time around. Nifty is now within striking distance of the previous high at 5399. It seems our market has consolidated enough and though not all indicators are pointing towards an upward breakout, may be this time the market might not disappoint the bulls.

 
 

INFOSYS WILL PROVIDE THE TRIGGER.

 

Out of all the factors affecting our market, the European problem was causing the highest distress and as a result the market was not able to move any higher despite a plethora of good news emanating from our economy. However last week saw the European market rallying and even the Euro outperforming the US dollar substantially. In response our market rallied sharply on Thursday and Friday. The results season kicks off next week and good results from Infosys should provide that much needed trigger for the market to post a breakout and rally sharply.

 
TECHNICALLY SPEAKING. 

The Sensex opened the week at 17473, made a high of 17857, a low of 17395 and closed the week at 17833. The Sensex gained 373 points on a weekly basis. Similarly Nifty opened the week at 5237, made a high of 5359, a low of 5205 and closed the week at 5352. The Nifty too closed with the week with a gain of 115 points.

 

Both Sensex and Nifty have formed a big white body on the weekly charts which engulfs the previous week’s small body. On the daily charts, both the indices have formed two big white bullish candles on Thursday and Friday as a result of strong global rally. The candlestick formations are quite encouraging for the bulls and hence one can expect strong upward bias in the coming week.

 

Momentum oscillator like the MACD continues with its Sell signal, but it is still in positive territory and is now moving higher towards the signal line. The RSI is now once again moving up and has reached 59. The ROC has just given a Buy signal as it has entered positive territory. The Directional Indicators are still in Buy mode as the +DI is above the -DI and moving further away, which is a positive sign.

 

Both Sensex and Nifty are on the verge of a strong bullish pattern breakout. If the Sensex manages a close above 17955 and Nifty above 5376, then a bullish inverted head & shoulders pattern will be completed and minimum target for that will be Sensex - 18465 and Nifty – 5522. In the above process one more pattern i.e. bullish flag formation will be completed and the target for that will be Sensex – 18732 and Nifty – 5609.

Both Sensex and Nifty were likely to test lower support levels, but somehow the undercurrent of the market was so strong that both the indices bounced back from near the same support from where it had bounced a week before. The Sensex bounced from 17395 as compared to 17373 last week and Nifty bounced from 5225 as compared to 5210 a week before. Hence the Sensex support at 16373 and Nifty at 5210 gains critical importance.

If we look at broader picture, then we are still correcting the fall of the Sensex from 21206 to 7697 and Nifty from 6357 to 2252. Since both the indices have managed a close above their 61.8% retracement levels, the next possible target will be Sensex 18315 and Nifty 5478 which are the 78.6% retracement levels of the entire previous fall.

 

Since last October, the market is moving in a rising channel and the channel top has provided strong resistance to the market and that supply trendline top falls at Sensex 18332 and Nifty 5498. Both the rising channel trendline top and the 78.6% retracement levels are almost coinciding and hence Sensex and Nifty are likely to find difficulty in crossing over 18315-18332 and 5478-5498 respectively.

 

The O.I.PCR is quite healthy at 1.40. Strong Put writing is visible at the strike of 5300 and as a result that level will act as strong support in case of a fall. Even though highest Call build up is seen at the strike of 5500, highest addition of open interest is seen at the strike of 5600. Thus the level of 5500-5600 is likely to provide strong resistance to the market going forward.

For the week ahead, Sensex will find Support at 17629-17488-17373 and will find Resistance at 17955-18182-18332.

 

For the week ahead, Nifty will find Support at 5288-5235-5187 and will find Resistance at 5399-5446-5498.

 
INDEX LEVELS:
  
 S3S2S1CLOSER1R2R3
Nifty5187523552885352539954465498
Sensex17373174881762917833179551818218332
  
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