Archives : SHOOTING STAR - 16/07/2010.
SHOOTING STAR – 16/07/2010.
 

The market gave a breakout as the Nifty crossed the previous high of 5399 and clocked a new high of 5453. But that joy was short lived as profit booking set in, as is the case whenever the Nifty approaches the supply trendline which is acting as a top for the rising channel. In the process, Nifty has made a bearish reversal pattern in the form of a shooting star. One more cause of worry is the negative divergence visible in the oscillators. Hence one needs to maintain cautious stance. In order to negate the bearish shooting star reversal pattern, the Nifty needs to close above the current high of 5453.


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SHOOTING STAR – 16/07/2010.
 

The market gave a breakout as the Nifty crossed the previous high of 5399 and clocked a new high of 5453. But that joy was short lived as profit booking set in, as is the case whenever the Nifty approaches the supply trendline which is acting as a top for the rising channel. In the process, Nifty has made a bearish reversal pattern in the form of a shooting star. One more cause of worry is the negative divergence visible in the oscillators. Hence one needs to maintain cautious stance. In order to negate the bearish shooting star reversal pattern, the Nifty needs to close above the current high of 5453.

 
FOLLOW UP BUYING NEEDED.
 

The week started with the IIP numbers showing a slower than expected growth rate of 11.5%, followed by the Infosys results which came in below expectations. Even though they improved their guidance upwards, the warning signals were clear when they warned about the global uncertainty and how that might drag down the performance of the company. However the market rejoiced the TCS results as it beat the street expectations by a big margin. The market has held on to the gains for the past week, but at higher levels follow up buying is missing and as a result the market continues its struggle around 5400.

 
TECHNICALLY SPEAKING.
 

The Sensex opened the week at 17875, made a high of 18167, a low of 17855 and closed the week at 17955. The Sensex gained 122 points on a weekly basis. Similarly Nifty opened the week at 5352, made a high of 5453, a low of 5351 and closed the week at 5393. The Nifty too closed with the week with a gain of 39 points.

 

Both Sensex and Nifty have formed a bearish reversal formation called shooting star on the weekly charts. As a result of this one can expect selling pressure at higher levels. If the market is to negate this bearish formation, then a close above 18167 for the Sensex and 5453 for the Nifty is required. Till then the bearishness will be seen at higher levels. On Thursday, the Sensex formed a bullish inverted hammer on the daily charts and as a result one can expect some support around 17855. The Nifty has formed a bullish engulfing pattern on Friday and one can expect some support coming in at 5351.

 

Momentum oscillators like the MACD and ROC are in their positive zone and continue with their buy signals. The RSI is also in buy mode at 61 and moving up. The Directional Indicators are still in Buy mode as the +DI is above the –DI and ADX has increased to 22 from 15, which is positive for the market. However the Stochastic Oscillator is giving a Sell signal, which will prove short term negative for the market. Besides, there are negative divergences visible on the RSI as well as MACD. Hence one needs to be cautious at higher levels.

 

Both Sensex and Nifty have given a bullish pattern breakout and as a result 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 are forming higher top, higher bottom formation and as a result the uptrend continues. In case of a fall, the bullish structure will remain intact until the current higher bottom of 17373 for the Sensex and 5210 for the Nifty remains in place. Hence one can expect strong support at above levels.

 

Currently if the low of 17855 on the Sensex and 5351 on the Nifty is broken, then one can expect short term trend to reverse and hence some correction of the current rise i.e. from 15960 to 18167 for the Sensex and 4786 to 5453 for the Nifty. The correction levels will be 17324-17064-16803 for the Sensex and 5198-5120-5041 for the Nifty.

 

Currently the market is trading well above their 50dmas and hence the intermediate trend continues to be positive. The 50dma for the Sensex is at 17233 and for the Nifty 5169.

 

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. This week, the Sensex made a high of 18167 and Nifty 5453, which are placed just below the 78.6% retracement mark.

 

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 18353 and Nifty 5505. 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 18315-18353 and 5478-5505 respectively.

 

The O.I.PCR is quite okay at 1.49. Call writing is visible at the strike of 5500 and hence one can expect strong resistance around those levels. 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.

 For the week ahead, Sensex will find Support at 17826-17679-17546 and will find Resistance at 18167-18353-18538. For the week ahead, Nifty will find Support at 5353-5310-5259 and will find Resistance at 5453-5505-5546.
      
INDEX LEVELS:
 
 S3S2S1CLOSER1R2R3
Nifty5259531053535393545355055546
Sensex17546176791782617955181671835318538
 
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