Archives : INFOSYS & INFLATION SPOIL THE PARTY - 15/04/2011.

INFOSYS & INFLATION SPOIL THE PARTY – 15/04/2011.

Even though it was a short trading week, it was not bereft of drama. The market was on track to post some handsome gains on a week to week basis but that was not to be as the party was spoiled by poor showing by Tech major Infosys, followed by rising Inflation numbers. Infosys delivered results which were much below market expectations and the guidance in rupee terms was also more on the pessimistic side. As a result Infosys stock fell by more than 10%. The bad news did not stop there, as the inflation numbers too turned out to be ugly. Inflation came in much higher than expectations and has evoked fear amongst market participants that the RBI may need to act and once again increase the interest rates. As a result of this double bad news the market became nervous and fell by around 1.5% to 2.0%.

5700 – 5950 TRADING RANGE FOR NIFTY.

 


INFOSYS & INFLATION SPOIL THE PARTY – 15/04/2011. 

Even though it was a short trading week, it was not bereft of drama. The market was on track to post some handsome gains on a week to week basis but that was not to be as the party was spoiled by poor showing by Tech major Infosys, followed by rising Inflation numbers. Infosys delivered results which were much below market expectations and the guidance in rupee terms was also more on the pessimistic side. As a result Infosys stock fell by more than 10%. The bad news did not stop there, as the inflation numbers too turned out to be ugly. Inflation came in much higher than expectations and has evoked fear amongst market participants that the RBI may need to act and once again increase the interest rates. As a result of this double bad news the market became nervous and fell by around 1.5% to 2.0%.

5700 – 5950 TRADING RANGE FOR NIFTY.

Last week we clearly mentioned that the market will find strong support between Nifty 5749-5710 and Sensex 19207-19041. Both indices tested this support zone at the start of the week and bounced back from there. Sensex bounced back from 19101 and Nifty from 5735. This support is aided by the 200dma, 100dma and 20dma making it a strong support. On the higher side, there is a strong resistance at the previous top at Sensex – 19811 and Nifty – 5944. This resistance is strongly aided by Supply Trendline which falls at Sensex – 19841 and Nifty – 5920. Hence the market is likely to move in a trading range of Sensex 19000 – 19850 and Nifty 5700 – 5950.

TECHNICALLY SPEAKING. 

The Sensex opened the week at 19382 made a high of 19737, a low of 19101 and closed the week at 19386. The Sensex made a small loss of 65 points on a weekly basis. Similarly Nifty opened the week at 5805, made a high of 5928, a low of 5735 and closed the week at 5824. The Nifty too closed with a minor loss of 18 points on a weekly basis.

On the weekly charts both the indices have once again formed a neutral formation. Sensex has formed a Juji which is a long legged Doji, whereas the Nifty has formed a Spinning Top formation which too is a neutral formation. Both formations are having long upper and lower shadows, which is a sign of high volatility. Now the market will wait for the next weeks candle formation to confirm further direction to be taken. On the daily charts on Friday, there is a Bearish Harami formation which is a bearish reversal pattern. Only a weekly close above Sensex 19811 and Nifty 5944 will negate the Bearish Harami pattern. Hence the short term timeframe suggests continuation of weakness but slightly higher timeframe still holds some hope for the bulls.

The market is still trading well above the long term average of 200dma (Sensex – 19068 and Nifty – 5724), medium term average of 50dma (Sensex – 18491 and Nifty – 5544) and short term average of 20dma (Sensex – 18991 and Nifty – 5704). As a result, the long term, medium term and short term trends continue to be positive. The 200dma along with the 100dma and 20dma will act as a support in case the fall in prices continues.

The market is continuously testing 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.

Couple of 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 – 19256 and Nifty – 5763) will act as a support whenever the prices fall. It acted as a strong support last week as the market respected that support, before bouncing back.

The low made last week is a strong support i.e. Sensex 19101 and Nifty 5735. This is aided by the support of 200dma, 100dma and 20dma. Hence strong support zone is seen between 19101 – 18991 for the Sensex and 5735 – 5704 for the Nifty. 

Similarly the top made last week (Sensex 19811 and Nifty 5944) has not been surpassed this week as it provided strong resistance. This resistance is further strengthened by the supply Trendline falling at Sensex 19847 and Nifty 5920. Thus 19811-19844 for the Sensex and 5920 – 5944 for the Nifty is likely to provide strong resistance going forward.

In case the market breaches the low made this week i.e. Sensex 19101 and Nifty 5735, 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 giving Buy signals. Both MACD and ROC continue with their Buy signals, while being in positive territory. RSI (58) and Money Flow (69) fell after reaching overbought territory but still continue to be in Buy territory. OBV too continues to be in Buy mode. Stochastic oscillator has given a Buy signal as %K has cut %D from below. The Directional Indicators are in Buy mode as +DI continues to be above –DI. The ADX at 30 suggests that the uptrend is now gaining strength.

Nifty O.I. PCR has reduced to 1.17. Strong Put buildup is seen at the strike of 5700 which suggests presence of strong support 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 19725. The Trendline Support is at 19256.

The Trendline Resistance for the Nifty is at 5920. The Trendline Support is at 5763.

For the week ahead, Sensex will find Support at 19101-18794-18542 and will find Resistance at 19697-19981-20267.

For the week ahead, Nifty will find Support at 5735-5634-5556 and will find Resistance at 5923-6023-6118.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5556

5634

5735

5824

5923

6023

6118

Sensex

18542

18794

19101

19386

19697

19981

20267

LAST WEEKS RECOMMENDATIONS:

Once again all the recommendations did well to achieve their targets but the star performer for the last week was Coromondel Fert. which went up by a whopping 12% in a week.

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy Hindzinc

143

149

149

2500

Rs.15,000

Buy ITC

183

188

193

2000

Rs.20,000

Buy Bhushan

478

501

521

500

Rs.21,500

Buy STFC

818

833

834

500

Rs.8,000

Buy Coromndel

304

319

340

1000

Rs.36,000

Total

Rs.1,00,500

THIS WEEKS RECOMMENDATIONS:  

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Havells

405

399

414

424

Buy UcoBank

120

118

124

129

Buy CanaraBank

651

644

664

680

Buy JubiliantFood

627

615

646

667

Buy Edserv

155

150

163

175

WATCH OUT FOR:

 

Uco

 

Edserv

 

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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