Archives : STRONG SUPPORT SEEN AT 5319 - 20/05/2011.

STRONG SUPPORT SEEN AT 5319 – 20/05/2011. 

On Tuesday the market gave a small Bearish Head & Shoulders breakout and the target for which is Sensex 16573 and Nifty 4964. Even though there was a smart rally witnessed on Friday, the target for Bearish Head and Shoulders remain intact as long as the market remains below Sensex 18724 and Nifty 5605. But the big support comes in between at the support trendline at Sensex 17784 and Nifty 5319. This support is extremely critical from the markets point of view as a breach of this support will confirm a long term Bearish Head & Shoulders pattern and that will not be good news for the Bulls.

 

 

 


STRONG SUPPORT SEEN AT 5319 – 20/05/2011. 

On Tuesday the market gave a small Bearish Head & Shoulders breakout and the target for which is Sensex 16573 and Nifty 4964. Even though there was a smart rally witnessed on Friday, the target for Bearish Head and Shoulders remain intact as long as the market remains below Sensex 18724 and Nifty 5605. But the big support comes in between at the support trendline at Sensex 17784 and Nifty 5319. This support is extremely critical from the markets point of view as a breach of this support will confirm a long term Bearish Head & Shoulders pattern and that will not be good news for the Bulls.

TECHNICALLY SPEAKING. 

The Sensex opened the week at 18492 made a high of 18492, a low of 18020 and closed the week at 18326. The Sensex made a loss of 205 points on a weekly basis. Similarly Nifty opened the week at 5541, made a high of 5541, a low of 5401 and closed the week at 5486. The Nifty closed with a loss of 58 points on a weekly basis.

Both the indices have formed a white body candle on Friday on the daily charts. There is a Homing Pigeon formation if we consider Wednesdays and Thursdays candlesticks. This is a bullish reversal pattern which requires a confirmation. Friday’s white body candle can be taken as a confirmation of Homing Pigeon. On the weekly charts, there is a black body candle formation with a long lower shadow, almost resembling a Hammer. But strictly speaking it fails to confirm itself as a Hammer. Nonetheless, the long lower shadow is a sign of support emerging at lower levels.

One can expect some sort of minor pull-back action on both the indices as long as low of 18020 for the Sensex and 5401 for the Nifty is not violated. We have to consider a pull-back of the fall from 19811-18020 for the Sensex and 5944-5401 for the Nifty. The pull-back levels are placed at 18704-18916-19127 for the Sensex and 5608-5673-5737 for the Nifty. If we consider the entire fall from 21108 to 17295 for the Sensex and 6318 to 5177 for the Nifty then the pull-back levels are 18751-19202-19651 for the Sensex and 5621-5758-5895 for the Nifty.

The market is well below the long term average i.e. 200dma (Sensex – 19176 and Nifty – 5755), medium term average of 50dma (Sensex – 18806 and Nifty – 5642) and short term average of 20dma (Sensex – 18663 and Nifty – 5594). As a result, all the three trends the short term, the medium term and the long term trends are down. In fact the short term, medium term and the long term averages are above the current market price and as a result, they will act as resistances going forward.

There exists a strong support line at Sensex 17784 and Nifty 5319. 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 38.2% pull-back level of the immediate fall, 38.2% of the entire fall, 50dma and 100dma all converge and are placed nearby, thus forming first resistance zone i.e. from Sensex 18704-18806 and Nifty 5608-5642. Above this, there is a second resistance zone formed by the convergence of 61.8% retracement of the immediate fall, 50% of the entire fall and 200dma. Thus Sensex 19127-19202 and Nifty 5737-5758 forms a second resistance zone.

All the major oscillators are in Sell mode. MACD and ROC both are in negative territory and continue with their Sell signals but ROC is moving higher. RSI at 41, too continues with its Sell mode. Bollinger band which had given a Sell signal two weeks back, continues with its Sell signal. Money Flow (49) has moved higher after being in oversold territory, and is just about to signal a Buy. OBV continues with its Sell signal. Stochastic oscillator has just 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, but they are converging suggesting that the downtrend has lost some strength. 

Nifty O.I. PCR remains quite low at 0.72. The Options build up has shifted to the next month series. Highest Call writing is seen at the strikes of 5700 followed by 5800, which suggests that the Nifty will face strong resistance around 5700-5800. At the same time, highest Put writing is seen at the strike of 5000. Thus the level of 5000 is likely to provide strong support for the Nifty in the next month series. On Friday, highest Put buildup was visible at the strike of 5300. Thus in the short term 5300 is likely to provide strong support followed by 5000.

The Trendline Resistance for the Sensex is at 19015. The Trendline Support is at 17784.

The Trendline Resistance for the Nifty is at 5661. The Trendline Support is at 5319.

For the week ahead, Sensex will find Support at 18020-17752-17469 and will find Resistance at 18583-18845-19101.

For the week ahead, Nifty will find Support at 5401-5319-5232 and will find Resistance at 5563-5634-5721.

INDEX LEVELS: 

 S3S2S1CLOSER1R2R3
Nifty5232531954015486556356345721
Sensex17469177521802018326185831884519101

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