Archives : NIFTY PASSES THE STRESS TEST - 23/07/2010

NIFTY “PASSES” THE STRESS TEST – 23/07/2010.

Finally the Nifty was able to surpass the barrier of 5400 and managed highest weekly close in more than 2 years. Sensex too managed a close above 18000 levels after a gap of over 2 years. Interestingly there was enough drama as the market started the week on the back foot, which was due to the bearish formation on the weekly charts a week before. Nifty had to overcome 5453 and Sensex 18167 to overcome the effect of this bearish formation. However both the indices successfully managed to overcome those levels. On Friday, Nifty managed to touch high of 5478 before retracing from that level; which is the 78.6% of the entire previous fall of Nifty from 6357 to 2252. Sensex is also likely to face resistance at 18315 which is the 78.6% of the entire previous fall from 21206 to 7697. 

EURO STRESS TEST.


NIFTY “PASSES” THE STRESS TEST – 23/07/2010.

Finally the Nifty was able to surpass the barrier of 5400 and managed highest weekly close in more than 2 years. Sensex too managed a close above 18000 levels after a gap of over 2 years. Interestingly there was enough drama as the market started the week on the back foot, which was due to the bearish formation on the weekly charts a week before. Nifty had to overcome 5453 and Sensex 18167 to overcome the effect of this bearish formation. However both the indices successfully managed to overcome those levels. On Friday, Nifty managed to touch high of 5478 before retracing from that level; which is the 78.6% of the entire previous fall of Nifty from 6357 to 2252. Sensex is also likely to face resistance at 18315 which is the 78.6% of the entire previous fall from 21206 to 7697. 

EURO STRESS TEST.

 

Most European banks passed the stress test and showed they are quite healthy. Only 7 out of 91 banks failed EU stress test. 5 Spanish banks along with 1 German and 1 Greece bank failed the stress test. Market was expecting atleast 10 banks to fail the stress test. Interestingly 7 failing banks need only 3.5bn Euro as shortfall in Tier I capital. This is surprisingly low number and shows that may be the stress test may not be rigorous enough.

 

TECHNICALLY SPEAKING.

The Sensex opened the week at 17914, made a high of 18237, a low of 17848 and closed the week at 18130. The Sensex gained 175 points on a weekly basis. Similarly Nifty opened the week at 5392, made a high of 5477, a low of 5353 and closed the week at 5449. The Nifty too closed with the week with a gain of 56 points.

 

Both Sensex and Nifty have formed a bullish white body candle on the weekly charts. Both the indices have also registered highest weekly close in more than 2 years. As the market awaited the EU stress test results after the closing on Friday, the traders chose to lighten their positions going into the weekend with uncertainty looming large and as a result the Sensex formed a doji on the daily charts. The market negated the shooting star formation of last week before as it went past Nifty 5453 and Sensex 18167.

 

Both the indices had formed bullish reversal pattern at Sensex 17855 and Nifty 5351 and the market too took support at those levels as the Sensex reversed its fall from 17848 and Nifty from 5353. In the short term, Sensex is likely to find support at 17848 and Nifty at 5351 and only on breach of the above mentioned levels, the short term trend can turn negative.

 

Momentum oscillators like the MACD and ROC are in their positive zone and moving up while continuing with their buy signals. The RSI is also in buy mode at 64 and moving higher. The Directional Indicators are also in Buy mode as the +DI is above the –DI and ADX has increased to 27 from 15, which is positive for the market indicating the trend is gaining in strength. Also the Stochastic Oscillator is now giving a Buy signal as %K moves over %D. The MFI is moving higher and is at 74 which shows that money is flowing into the market. Also the OBV has signaled a Buy.

 

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. Besides that one more pattern i.e. bullish flag formation has been 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. Sensex has formed a higher bottom at 17848 as compared to 17373. Similarly Nifty has formed a higher bottom at 5353 as compared to 5210. The short term trend will be in danger only if 17848 on the Sensex and 5353 on the Nifty are breached. Similarly one need not worry about the medium term as long as the level of 17373 for the Sensex and 5210 for the Nifty remains intact.

 

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 17315 and for the Nifty 5195.

 

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. Nifty has managed to reach 5478 in the last week.

 

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 18373 and Nifty 5512. 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 18315-18373 and 5478-5512 respectively.

 

The O.I.PCR is quite strong at 1.63. Highest Open Interest build up is seen at 5500 strike Call and hence it is expected to provide resistance in the short term. 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 17987-17848-17679 and will find Resistance at 18344-18564-18732.

 

For the week ahead, Nifty will find Support at 5399-5350-5310 and will find Resistance at 5505-5553-5609.

 

INDEX LEVELS:

 

  

 S3S2S1CLOSER1R2R3
Nifty5310535053995449550555535609
Sensex17679178481798718130183441856418732

LAST WEEKS RECOMMENDATIONS:

Except for Sesa Goa most of the other stocks performed quite well. The star performer for the past week was NiiT Tech, which went up by an astonishing 10%.

PAIR NO.STOCKRec.priceTgt Reached Lot sizeProfit
1BuyDivisLab785799797500Rs. 6,000
SellHDFC301929612955125Rs. 8,000
2BuyOnMobile2933012991000Rs. 6,000
SellBhel243724102390125Rs. 5,875
3BuyNiiTTech1821962002000Rs. 36,000
SellSesaGoa343331341500Rs. 1,000
      ProfitRs.62,875

THIS WEEKS RECOMMENDATIONS:

STOCKCMPSLTgt-1Tgt-2
Buy SBI2496246725322571
Buy BoB725716739754
Buy BeL1848183118791911
Buy Bharti313309321330
Buy SKF529517544561

WATCH OUT FOR:

 

  

   
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