Archives : MORNING DOJI STAR REVERSAL - 13/08/2010

MORNING DOJI STAR REVERSAL - 13/08/2010.

Weak global markets forced the market to test lower levels on Thursday. But the inherent strength in the market made sure that the dip was bought immediately and the market saw an immediate bounce back from lower levels. Sensex managed to bounce back from 17914, which is now a higher bottom as compared to the previous higher bottom of 17838 and the Nifty bounced back from 5372 which is higher than the previous higher bottom of 5349. The formation of higher bottoms augurs well for the bulls and the short term trend will be safe as long as the Sensex level of 17838 and Nifty level of 5349 remains intact. 

In the process, Sensex formed two bullish white candles on Thursday and Friday indicating buying pressure at lower levels. But the Nifty managed to form a Bullish Reversal Pattern on the daily charts called Morning Doji Star pattern. This pattern has bullish implication and the impact of this pattern can be negated only if the Nifty manages a close below the low of 5372. In case of the Sensex, the bullish strength of the pattern can be reversed only if the Sensex manages a close below 17914. Markets in the process have formed strong support zone for the Sensex between 17914 – 17838 and 5372 - 5349 for the Nifty. In case the market breaches the above mentioned levels, a short term trend reversal will be signaled and the market will then head towards the next major support which is at Sensex 17373 and Nifty 5210.

 


MORNING DOJI STAR REVERSAL - 13/08/2010.

Weak global markets forced the market to test lower levels on Thursday. But the inherent strength in the market made sure that the dip was bought immediately and the market saw an immediate bounce back from lower levels. Sensex managed to bounce back from 17914, which is now a higher bottom as compared to the previous higher bottom of 17838 and the Nifty bounced back from 5372 which is higher than the previous higher bottom of 5349. The formation of higher bottoms augurs well for the bulls and the short term trend will be safe as long as the Sensex level of 17838 and Nifty level of 5349 remains intact. 

In the process, Sensex formed two bullish white candles on Thursday and Friday indicating buying pressure at lower levels. But the Nifty managed to form a Bullish Reversal Pattern on the daily charts called Morning Doji Star pattern. This pattern has bullish implication and the impact of this pattern can be negated only if the Nifty manages a close below the low of 5372. In case of the Sensex, the bullish strength of the pattern can be reversed only if the Sensex manages a close below 17914. Markets in the process have formed strong support zone for the Sensex between 17914 – 17838 and 5372 - 5349 for the Nifty. In case the market breaches the above mentioned levels, a short term trend reversal will be signaled and the market will then head towards the next major support which is at Sensex 17373 and Nifty 5210.

 

 

TECHNICALLY SPEAKING.

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The Sensex opened the week at 18141, made a high of 18309, a low of 17914 and closed the week at 18167. The Sensex gained a meager 24 points on a weekly basis. Similarly Nifty opened the week at 5439, made a high of 5492, a low of 5372 and closed the week at 5452. The Nifty too closed with the week with a minor gain of 13 points.

 

On the weekly charts both Sensex and Nifty have formed a small white body Spinning Top formation, which is a neutral formation. The long upper indicates selling pressure at higher levels and long lower shadow indicates buying taking place at lower levels. This indicates that the market is undecided about the direction it wants to go. But on the daily charts, formation of two white body candles (Thursday and Friday) on the Sensex augurs well for the bulls. Nifty on the other hand has formed a bullish reversal pattern known as Morning Doji Star pattern.

 

Due to the weak global markets, Sensex and Nifty both went to quite low levels (Sensex – 17914 and Nifty – 5372) before bouncing back. In the process, both the indices registered higher bottom formation. Sensex bounced from 17914 as compared to the higher bottom of 17838 and Nifty bounced from 5372 as compared to the higher bottom of 5349. The short term trend will be in danger only if both the indices close below their respective higher bottoms i.e. Sensex – 17838 and Nifty – 5349. In such a case a short term down trend will be triggered and the market will then head towards next major higher bottom which is at Sensex 17373 and Nifty 5210. Short term trend will remain intact as long as the Sensex stays above 17838 and Nifty remains above 5349. 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.

 

As long as the market remains above the 20dma, the short term trend will remain positive. The 20dma for the Sensex falls at 18074 and Nifty at 5426. The intermediate trend will be reversed from up to down, if the 50dma is breached. 50dma for the Sensex is at 17746 and Nifty 5325.

 

Oscillators are painting a mixed picture. MACD even though in the positive territory, continues in its Sell mode. RSI (57) is in a Buy mode and is moving higher. ROC continues in its buy mode by staying in the positive zone. Stochastic oscillator has just given a Buy signal as % K has cut % D from below. While the OBV continues in its buy mode, the Money Flow Index (49) is still in a Sell mode and is presenting a mixed picture. But the area of concern is the negative divergence which is seen on the oscillators like MACD, RSI and ROC. The ADX has reduced to about 23 but still strength in the uptrend continues. The Directional Indicators continue to be in buy mode and are once again diverging, which is a positive signal for the bulls.

 

Both Sensex and Nifty have completed a Bullish Flag pattern breakout and as a result the target for that will be Sensex – 18732 and Nifty – 5609.

 

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 5492 this week, while the Sensex has managed a high of 18309 this week, which is almost just below the 78.6% level of 18315.

 

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 18438 and Nifty 5533. Both the rising channel trendline top and the 78.6% retracement levels are very near to each other and hence Sensex and Nifty are likely to find difficulty in crossing over 18315-18438 and 5478-5533 respectively.

 

The O.I.PCR is quite high at 1.74, which is indicative that the market is quite bullish and is seeing lot of Put writing. Highest Open Interest build up is seen at 5300 strike Put and hence it is expected to provide strong support. Increase in open interest for 5400 Put suggests near term support at 5400. Strong Call writing is visible at the strike of 5600. The data clearly suggests that the Nifty is likely to move in a trading range from 5300 on the lower side to 5600 on the higher side.

 

Sensex has strong Trendline Resistance which is also the rising channel top at 18438. The trendline support for the Sensex is at 17791.

 

Nifty has strong Trendline Resistance which is also the rising channel top at 5533. The trendline support for the Nifty is at 5341.

 

For the week ahead, Sensex will find Support at 18047-17911-17791 and will find Resistance at 18309-18438-18650.

 

For the week ahead, Nifty will find Support at 5399-5351-5310 and will find Resistance at 5492-5533-5592.

 

 

INDEX LEVELS:

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 S3S2S1CLOSER1R2R3
Nifty5310535153995452549255335592
Sensex17791179111804718167183091843818650

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LAST WEEKS RECOMMENDATIONS:

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STOCKReco. PriceTgtReachedLot SizeProfit
Mundra784812824500Rs.20,000
DishTV49.8051.7050.608000Rs.6,400
Bhushan164116721678125Rs.4,625
HindujaV450477473500Rs.11,500
LiCHsg117912241243250Rs.16,000
    TotalRs.58,525

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THIS WEEKS RECOMMENDATIONS:

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STOCKCMPSLTgt-1Tgt-2
Buy AckrutiCity533526545559
Buy FinTech1320130713431369
Buy RenukaSugar68677276
Buy KTK Bank174171180187
Buy Bom.Dyeing661647687714

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WATCH OUT FOR:

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Ackruti

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