Archives : ONCE AGAIN, A BEARISH ENGULFING - 18/02/2011.

ONCE AGAIN, A BEARISH ENGULFING – 18/02/2011. 

SHORT TERM DOWNTREND RESUMES.

 

It was expected that after such a steep fall, the market will bounce back and test the resistance zone created by the 61.8% retracement of the last fall and the 200dma i.e. 5560-5620. As expected this resistance zone proved too much for the bulls to overcome. There was a Bearish Engulfing pattern formed on the daily charts on the Nifty and as a result we can assume that the pull-back is almost as good as done. The downtrend has resumed once again. It is likely that the bottom created in the last fall around Sensex 17295 and Nifty 5177 might be tested again. In bear markets, the bottoms usually get breached and if that is the case here i.e. the bottom of 5177 for the Nifty gets taken out, then we may possibly head towards next support zone of 4777-4842.

 

ONCE AGAIN, A BEARISH ENGULFING – 18/02/2011. 

SHORT TERM DOWNTREND RESUMES.

 

It was expected that after such a steep fall, the market will bounce back and test the resistance zone created by the 61.8% retracement of the last fall and the 200dma i.e. 5560-5620. As expected this resistance zone proved too much for the bulls to overcome. There was a Bearish Engulfing pattern formed on the daily charts on the Nifty and as a result we can assume that the pull-back is almost as good as done. The downtrend has resumed once again. It is likely that the bottom created in the last fall around Sensex 17295 and Nifty 5177 might be tested again. In bear markets, the bottoms usually get breached and if that is the case here i.e. the bottom of 5177 for the Nifty gets taken out, then we may possibly head towards next support zone of 4777-4842.

 

 

TECHNICALLY SPEAKING.

The Sensex opened the week at 17940, made a high of 18690, a low of 17857 and closed the week at 18211. The Sensex gained 483 points on a weekly basis. Similarly Nifty opened the week at 5430, made a high of 5599, a low of 5340 and closed the week at 5458. The Nifty too closed with a gain of 148 points on a weekly basis.

 

Both the indices have formed a Bearish Engulfing pattern on the daily charts on Friday and as a result the short term trend has turned down. On the weekly charts, both Sensex and Nifty have formed a white body candle with a long upper shadow which is almost like a shooting star. But it is not a shooting star, as there is no gap between the bodies and also there is a small lower shadow in the Sensex. The long upper shadow is a result of selling pressure witnessed at higher levels.

 Price Trend Analysis suggests that since the prices continue to form lower tops and lower bottoms, both the medium and long term trend continue to be down. Moving Average Analysis too suggests that the trends in all time frames continue to be down. Market is below the 200dma (Sensex – 18776 and Nifty – 5636) and as a result the long term trend is down. This week the market tested the 20dma on Thursday and Friday but finally closed the week just below the 20dma (Sensex – 18259 and Nifty – 5472) and as a result the short term trend continues to be down. The medium term trend continues to be down as the market is well below the 50dma (Sensex – 19148 and Nifty – 5737).

Both the indices tested the resistance zone formed by a cluster of Fibonacci retracement levels and the 200dma. The market failed to cross that resistance zone by forming a Bearish Engulfing pattern near that resistance zone, thus marking the end of the short term uptrend. It is likely that the indices will retest the bottom made last week i.e. Sensex 17295 and Nifty 5177. In Bear markets, the bottoms are normally breached and if that happens then we have to find lower support zones. Hence if we consider the medium term rise from 13219-21108 for the Sensex and 3918 to 6338 for the Nifty, then the retracement levels will be 18094-17163-16233 for the Sensex and 5414-5128-4842 for the Nifty. If we consider the entire rise from 7697 to 21108 for the Sensex and 2252 to 6338 for the Nifty, then the correction levels for the Sensex will be at 15985-14402-12820 and 4777-4295-3813 for the Nifty. Thus in case, the lows made in the previous week are broken, the Sensex is likely to test the cluster of supports emerging between 16233-15985 and Nifty between 4842-4777. 

Oscillators are painting a mixed picture. MACD, even though in negative territory continues with its Buy signal. The ROC remains in Buy mode. RSI has dropped to 44 after touching 50, and hence continues in Sell mode. Stochastic Oscillator has given a Sell signal as it is in overbought territory (%K is at 82) and also %K has cut %D from above. Money Flow is moving higher in line with the increase in price suggesting that some money has entered at lower levels. The OBV continues with its Buy signal. ADX has reduced to 30 suggesting that the downtrend has lost some of its strength. One interesting aspect of Directional Indicators is that +DI has cut –DI from below on Friday and has signaled a Buy. The Bollinger Band which was in Sell mode for the past 4 weeks had its stop-loss triggered, as the prices managed a close above the 20dma on Thursday. But the prices closed below that level on Friday. Currently Bollinger Band is not giving any Buy or Sell signal.

 

The O.I. PCR has increased to 1.05. Strong Call build up is seen at 5500 strike. For the next month series, there is good open interest position visible for 5200 PE and 5600 CE. This suggests that 5200 on the downside and 5600 on the upside should act as support and resistance respectively.

 

The Trendline Resistance for the Sensex is at 18873. The Trendline Support is at 17338.

 

The Trendline Resistance for the Nifty is at 5653. The Trendline Support is at 5191.

 

For the week ahead, Sensex will find Support at 17819-17395-16943 and will find Resistance at 18564-18954-19342.

 

For the week ahead, Nifty will find Support at 5348-5210-5079 and will find Resistance at 5567-5690-5824.

INDEX LEVELS: 

 S3S2S1CLOSER1R2R3
Nifty5079521053485458556756905824
Sensex16943173951781918211185641895419342

LAST WEEKS RECOMMENDATIONS:

Once again we hit Bull’s eye as all the targets were achieved with ease. The star performers for the week were Hind Oil Exp (up by 10%) and Jindal South-West (up by 13%). 

STOCKReco. PriceTgtReachedLot SizeProfit
Buy BajajAuto125513191362125Rs.13,375
Buy Sintex1611691701000Rs.9,000
Buy OBC333344354500Rs.10,500
Buy HindOil1671841841000Rs.17,000
Buy JindalSW94210171065125Rs.15,375
    TotalRs.65,250

THIS WEEKS RECOMMENDATIONS: 

STOCKCMPSLTgt-1Tgt-2
Sell HCLTech457465443427
Sell PFC243247235227
Sell Pet.LNG112115107101
Sell Patni456462442427
Sell DLF232237223214
  

WATCH OUT FOR:

HCL Tech

 

PetronetLNG

 

 

 

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