Archives : MARKET TAKES A BREATHER - 08/04/2011.

MARKET TAKES A BREATHER – 08/04/2011.

After rallying nonstop for the last two weeks, the market as expected took a breather this week. It was mentioned in the last weeks article that there is a strong overhead resistance in the form of supply trendline falling at Nifty – 5935. The Nifty tested that level for couple of days but could not close above that supply line. The market seems to be consolidating before it can take off that overhead resistance. Hence any fall in the price should be seen as a correction of the recent rise and not a trend reversal. 

SUPPORT ZONE AT NIFTY 5749-5710.


MARKET TAKES A BREATHER – 08/04/2011. 

After rallying nonstop for the last two weeks, the market as expected took a breather this week. It was mentioned in the last weeks article that there is a strong overhead resistance in the form of supply trendline falling at Nifty – 5935. The Nifty tested that level for couple of days but could not close above that supply line. The market seems to be consolidating before it can take off that overhead resistance. Hence any fall in the price should be seen as a correction of the recent rise and not a trend reversal.

SUPPORT ZONE AT NIFTY 5749-5710.

In case the prices continue to correct, there is a strong support zone existing near Nifty 5749-5710 and Sensex 19207-19041. This support zone is formed as a result of the convergence of the 200dma, 100dma along with the trendline support which is in the form of Rising Channel Top.

TECHNICALLY SPEAKING. 

The Sensex opened the week at 19473 made a high of 19811, a low of 19388 and closed the week at 19451. The Sensex made a minor gain of 31 points on a weekly basis. Similarly Nifty opened the week at 5842, made a high of 5944, a low of 5822 and closed the week at 5842. The Nifty too closed with a minor gain of 16 points on a weekly basis.

On the weekly charts both the indices have formed a Doji Star formation. The Doji formed this week has a long upper shadow and a very small lower shadow which almost resembles Gravestone Doji. Had the small lower shadow not been present, then it would have been a Gravestone Doji. The long upper shadow is a sign of selling pressure at higher levels. If we consider last three weeks candles, then it has formed a Deliberation or a Stalled pattern. A Stalled pattern is formed in an uptrend and is a special case of Three White Soldiers but has bearish implications; depending on the next weeks candle formation. A black body formation in the next week will confirm Bearish Trend Reversal. Only a close above the high of previous weeks candle (Sensex 19811 and Nifty 5944) will negate the Bearish pattern. On the daily charts on Friday, there is a black body formation which is suggestive of the daily bearishness.

The market is well above the long term average of 200dma (Sensex – 19041 and Nifty – 5716), medium term average of 50dma (Sensex – 18419 and Nifty – 5522) and short term average of 20dma (Sensex – 18821 and Nifty – 5652). As a result, the long term, medium term and short term trends continue to be positive. The 200dma will act as a support in case the fall in prices continues.

The market briefly flirted with the 61.8% retracement level of the entire fall of Sensex from 21108-17295 and Nifty from 6338-5177. These levels are 19651 for the Sensex and 5894 for the Nifty. The market needs to stay consistently above these levels and only then will it be able to take a shot at the previous high.

In the current rally, both Sensex and Nifty have left behind two upward gaps on the daily charts. The first gap can be termed as a Bullish Breakaway gap and the second gap as Runaway or a Measuring Gap. Measuring Gap helps in setting a minimum target for the rally and that target for the Sensex falls at 19558 and Nifty 5912. Both Sensex and Nifty have achieved the above mentioned targets.

Two weeks back both the indices gave a Bullish Breakout for Rising Channel formation. The targets for Rising Channel pattern breakout are Sensex 20340 and Nifty 6095. The Channel Top (Sensex – 19207 and Nifty – 5749) will now act as a support in case of a fall in prices.

There are various support levels existing between the Rising Channel Top (Sensex – 19207 and Nifty – 5749) which is now acting as a support and the 200dma (Sensex – 19041 and Nifty – 5710).  Thus the zone between Nifty 5749-5710 and Sensex 19207-19041 will provide strong support.

In case the market continues to correct then we will have to look at the retracement of the entire rise from 17295 to 19811 for the Sensex and 5177 to 5944 for the Nifty. The retracement or correction levels in that case will be placed at 18850-18553-18256 for the Sensex and 5651-5560-5470 for the Nifty. 

Major oscillators are still positive and hence we can consider the past week as a sign of consolidation. Both MACD and ROC continue with their Buy signals, while being in positive territory. RSI (63) fell after reaching overbought territory last week. Money Flow (82) continues to be in overbought territory since last week and is signaling a Sell. At the same time the OBV is yet to give a Sell signal. Stochastic oscillator has signaled a Sell as %K has cut %D from above and is moving lower. The Directional Indicators, are in Buy mode as +DI continues to be above –DI. The ADX at 26 suggests that the uptrend is now gaining strength.

Nifty O.I. PCR has fallen to 1.20. Strong Put buildup is seen at the strike of 5700 which suggests that support can be expected around that level. At the same time, highest Call writing is seen at the strike of 6000. Thus the Nifty is likely to face strong resistance around 6000.

The Trendline Resistance for the Sensex is at 19881. The Trendline Support is at 19207.

The Trendline Resistance for the Nifty is at 5917. The Trendline Support is at 5749.

For the week ahead, Sensex will find Support at 19207-18954-18736 and will find Resistance at 19768-20084-20332.

For the week ahead, Nifty will find Support at 5763-5690-5624 and will find Resistance at 5932-6023-6118.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5624

5690

5763

5842

5932

6023

6118

Sensex

18736

18954

19207

19451

19768

20084

20332

LAST WEEKS RECOMMENDATIONS:

All the recommendations did well but the star performer for the last week was Mercator Lines which went up by a whopping 15% in a week. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy NMDC

295

304

305

1000

Rs.10,000

Buy Orchid

316

326

325

2000

Rs.18,000

Buy JsWSt

949

986

1015

250

Rs.16,500

Buy LiCHsg

233

243

242

1250

Rs.11,250

Buy Mercator

40

45

46

4000

Rs.24,000

Total

Rs.79,750

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy HindZinc

143

140

149

156

Buy ITC

183

181

188

194

Buy BhushanSt

478

471

489

501

Buy STFC

818

809

833

851

Buy Coromandel

304

300

311

319

WATCH OUT FOR:

Hind Zinc 

 

 

 

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