Archives : 5700-5750 : Strong Resistance Zone - 06/05/2011.
5700-5750 : STRONG RESISTANCE ZONE – 06/05/2011. 

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Last week the Nifty, which was hanging on to the support levels, managed to breach them comprehensively. As a result there was a trend reversal observed in all time frames. Nifty was looking weak and a breach of the support levels was on expected lines, but what surprised the market was the ease with which the supports were broken. May is generally a bearish month from the markets point of view and this time too it promises to be the same.

 

After eight consecutive black candles on the daily charts, a bullish white candle was finally formed on Friday. The white candle represents the start of a much needed relief rally and it should not be mistaken as a signal for trend reversal. Hence one should keep in mind that after such a severe fall, it is not very uncommon to witness a small pull-back but generally these pull-backs get sold into. One can expect strong resistance for the Nifty around 5700-5750 levels.

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5700-5750 : STRONG RESISTANCE ZONE – 06/05/2011. 

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Last week the Nifty, which was hanging on to the support levels, managed to breach them comprehensively. As a result there was a trend reversal observed in all time frames. Nifty was looking weak and a breach of the support levels was on expected lines, but what surprised the market was the ease with which the supports were broken. May is generally a bearish month from the markets point of view and this time too it promises to be the same.

After eight consecutive black candles on the daily charts, a bullish white candle was finally formed on Friday. The white candle represents the start of a much needed relief rally and it should not be mistaken as a signal for trend reversal. Hence one should keep in mind that after such a severe fall, it is not very uncommon to witness a small pull-back but generally these pull-backs get sold into. One can expect strong resistance for the Nifty around 5700-5750 levels.

TECHNICALLY SPEAKING. 

The Sensex opened the week at 19224 made a high of 19253, a low of 18160 and closed the week at 18518. The Sensex lost 617 points on a weekly basis. Similarly Nifty opened the week at 5766, made a high of 5775, a low of 5443 and closed the week at 5551. The Nifty too closed with a loss of 198 points on a weekly basis.

On the weekly charts, both the indices have formed an Opening Black body Marubuzo. This is a bearish formation and in line with the current bearishness being witnessed in the market. On the daily charts, there were eight consecutive black candles formed and there was no relief for the market. Only on Friday, the market finally managed to stage a brief recovery and in the process, both the indices made an Opening White body Marubuzo. This is a bullish pattern and marks the beginning of a small pull-back.

Since there is a formation of a Bullish candle pattern on the daily charts, we can presume that the market is undergoing a pull-back of the fall from 19811-18160 for the Sensex and 5944-5443 for the Nifty. The pull-back levels are 18790-18985-19180 for the Sensex and 5634-5693-5752 for the Nifty. Any move which surpasses the 61.8% retracement level i.e. Sensex 19180 and Nifty 5752, will mark the resumption of uptrend.

The market did not take much support at the coveted 200dma (Sensex – 19160 and Nifty – 5752) and 50dma (Sensex – 18769 and Nifty – 5631) and managed to breach those levels quite effortlessly. The market had already breached the 20dma (Sensex – 19201 and Nifty – 5763) a week before. As a result, all the three trends the short term, the medium term and the long term trend have turned down.

Any breach of the low made this week i.e. Sensex 18160 and Nifty 5443 will lead the market down to test the strong support line at Sensex 17711 and Nifty 5300. This is a very critical support line, and a breach of this support line will confirm a Bearish Head and Shoulders Reversal pattern. This will be herald a strong bear onslaught.

On the higher side the 50% pull-back level i.e. Sensex 18985 and Nifty 5693 coincides with the resistance formed by a bottom (Sensex 18954 and Nifty 5690) and 100dma. Above this, the 61.8% retracement level i.e. Sensex 19180 and Nifty 5752 coincides with the 200dma. Thus we have strong Resistance zone between 18954-19180 for the Sensex and 5690-5752 for the Nifty. 

MACD and ROC both are in negative territory and continue with their Sell signals. RSI at 40, too is in Sell mode. Bollinger band which had given a Sell signal on 2nd May, continues with its Sell signal. Money Flow (22) has moved higher after being in oversold territory. OBV continues with its Sell signal. Stochastic oscillator is in oversold territory and has given a Buy signal as %K has cut %D from below. The Directional Indicators too continue with their Sell signal as +DI remains below –DI.

Nifty O.I. PCR has fallen dramatically to a low of 0.72, which is very near to the oversold levels. The fall in the ratio suggests lot of Put writers have lost consistently. Highest Call writing is seen at the strikes of 5700 followed by 5800, which suggests presence of strong resistance between 5700 and 5800. At the same time, highest Put writing is seen at the strike of 5400. Thus the level of 5400 is likely to provide some support for the Nifty..

The Trendline Resistance for the Sensex is at 18954. The Trendline Support is at 17711.

The Trendline Resistance for the Nifty is at 5650. The Trendline Support is at 5300.

For the week ahead, Sensex will find Support at 18190-17857-17493 and will find Resistance at 18736-18954-19167.

For the week ahead, Nifty will find Support at 5451-5348-5242 and will find Resistance at 5624-5693-5772.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5242

5348

5451

5551

5624

5693

5772

Sensex

17493

17857

18190

18518

18736

18954

19167

LAST WEEKS RECOMMENDATIONS:

Once again all our recommendations achieved their targets with ease. The Star performer for the week was Bank of India which fell by around 16%. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Sell JindalStl

654

622

614

500

Rs.20,000

Sell TechMah

686

656

650

500

Rs.18,000

Sell BoI

457

425

385

500

Rs.36,000

Sell BhrtFrge

347

332

332

1000

Rs.15,000

Sell YesBank

305

287

279

1000

Rs.26,000

Total

Rs.1,15,000

THIS WEEKS RECOMMENDATIONS:

Expect lot of Volatility in this week and hence it is advised to hedge ones position. 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy ABB

891

880

917

944

Buy BPCL

666

658

678

692

Buy Orchid

309

305

316

323

Buy JainIrrig

185

182

191

197

Buy VGuard

192

187

201

212

WATCH OUT FOR:

BPCL

Jain Irrigation

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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