Archives : Market Cracks On Global Fear - 05/08/2011.

MARKET CRACKS ON GLOBAL FEAR – 05/08/2011.

Global markets cracked after the US market tanked on Thursday due to a fear of a double dip recession. The weakening financial position in the US and Europe took a toll on our markets on Friday as the market sank in line with other Asian markets. At one point in time during the day, the Sensex was down by around 700 points. Bargain buying at lower levels emerged, which helped the market recover some of its losses. 

SELL ON RISE.

The long term, medium term and short term trend continue to remain down, but minor hope is provided in the form of a bullish candle formation and some oscillators being in oversold territory. Assuming the low made on Friday holds, one can expect some minor recovery in the short term upto Resistance zone of Sensex 18005-18068 and Nifty 5422-5433. This recovery should be used to create short positions at higher levels and exit stuck up long positions. It is important to remember that the Bearish Head & Shoulders on the weekly chart has been completed as the market finally managed a close below the bearish neckline.

 

 

 

 

MARKET CRACKS ON GLOBAL FEAR – 05/08/2011. 

Global markets cracked after the US market tanked on Thursday due to a fear of a double dip recession. The weakening financial position in the US and Europe took a toll on our markets on Friday as the market sank in line with other Asian markets. At one point in time during the day, the Sensex was down by around 700 points. Bargain buying at lower levels emerged, which helped the market recover some of its losses.

SELL ON RISE.

The long term, medium term and short term trend continue to remain down, but minor hope is provided in the form of a bullish candle formation and some oscillators being in oversold territory. Assuming the low made on Friday holds, one can expect some minor recovery in the short term upto Resistance zone of Sensex 18005-18068 and Nifty 5422-5433. This recovery should be used to create short positions at higher levels and exit stuck up long positions. It is important to remember that the Bearish Head & Shoulders on the weekly chart has been completed as the market finally managed a close below the bearish neckline.

TECHNICALLY SPEAKING. 

The Sensex opened the week at 18352, made a high of 18440, a low of 16990 and closed the week at 17305. The Sensex lost 892 points on a weekly basis. Similarly Nifty opened the week at 5527, made a high of 5551, a low of 5116 and closed the week at 5211. The Nifty too closed with a weekly loss of 271 points.

Both Sensex and Nifty have formed a Big Black body candle on the weekly charts. On the daily charts, Sensex has formed a Black body Hammer on Friday. The Nifty has formed a small white body candle with a long lower shadow but it cannot be classified as a Hammer as there is an upper shadow. The Bullish Hammer formed on the Sensex can be classified as a Takuri Line formation as the lower shadow is very long. According to San-Ku method, when there are three gaps, the third gap is the result of conflict between the bulls and the bears and the Sakata’s method recommends buying when this gap is formed. Thus one can expect a minor pull-back in the very short term time frame.

The market is well below the short term average of 20dma (Sensex – 18365 and Nifty – 5526), medium term average of 50dma (Sensex – 18361 and Nifty – 5517) and long term average of 200dma (Sensex – 18945 and Nifty – 5686). As a result the short term, medium term and the long term trend remains down.

Minor pull-backs cannot be ruled out because of bullish candle formation on the daily charts on Friday and some oscillators being in oversold zone. We are assuming that the low made by Sensex and Nifty on Friday does not get breached, then one can expect a minor recovery of the immediate fall from Sensex 19131 to 16990 and from Nifty 5740 to 5116. The pull-back levels are 17808-18061-18313 for the Sensex and 5354-5428-5502 for the Nifty. If one considers the fall from a slightly higher degree i.e. from 19811 to 16990 for the Sensex and 5944 to 5116 for the Nifty; then the correction levels in that case will be 18068-18401-18733 for the Sensex and 5432-5530-5628 for the Nifty. Thus 50% of the immediate fall coincides with 38.2% of the intermediate fall forming a confluence zone. This zone is further strengthened by the presence of a bearish falling gap between Sensex 18005-18037 and Nifty 5422-5433. Thus there is a strong Resistance zone formed within the indices between Sensex 18005-18068 and Nifty 5422-5433.

In case the low made on Friday is breached then the Sensex and Nifty are likely to fall further upto next strong support zone atleast. From a broader perspective the market is correcting the Sensex rise from 13219 to 21108 and Nifty from 3918 to 6338. The correction levels in that case are 18094-17163-16233 for the Sensex and 5414-5128-4842 for the Nifty. The indices took support near the 50% level of this rally. In case the fall continues then the 61.8% of the above mentioned rise coincides with the 38.2% level of the entire rise from 7697 to 21108 for the Sensex and 2252 to 6338 for the Nifty. The 38.2% level falls at 15985 for the Sensex and 4777 for the Nifty. There is an intermediate bottom formed at Sensex 15960 and Nifty 4786. This helps in forming a strong Support zone at Sensex 15960-16233 and Nifty 4777-4842.

Both Sensex and Nifty have closed below the neckline of the weekly Bearish Head and Shoulders (Sensex 18182 and Nifty 5436), thus confirming a breakout for Bearish H & S. The Bearish H & S has given way to Bearish Descending Triangle which could not get completed as the prices just closed above the breakout line. But the validity for Bearish Head and Shoulders remains intact. The target for the same falls at 14651-13928 for the Sensex and 4357-4143 for the Nifty.

Majority of the oscillators are in Sell mode, while some are in oversold territory. MACD and ROC are both in negative territory and both continue with their Sell signals. RSI is at 28 and is in oversold territory. The Stochastic oscillator too is in oversold territory and is signaling a Buy as %K cuts %D from below. Directional Indicators continue in their Sell mode and so does the Bollinger Band which had given a Sell signal last week. Money Flow has fallen to 26 and is in Sell mode suggesting money flowing out of the market. The other lead indicator OBV too has given a Sell signal as it has breached its previous low.

Nifty O.I. PCR has fallen to a low of 0.82. It is clear that the Put writers have lost heavily in this fall. Put positions have now shifted to the 5000 strike and Call writing is seen at 5500 strike. It clearly suggests that not only has the range shifted lower but has expanded on the lower side.

The Trendline Resistance for the Sensex is at 17843. The Trendline Support is at 16733.

The Trendline Resistance for the Nifty is at 5322. The Trendline Support is at 5033.

For the week ahead, Sensex will find Support at 16990-16684-16373 and will find Resistance at 17664-18037-18415.

For the week ahead, Nifty will find Support at 5116-5019-4929 and will find Resistance at 5328-5443-5556.

INDEX LEVELS: 

 S3S2S1CLOSER1R2R3
Nifty4929501951165211532854435556
Sensex16373166841699017305176641803718415

LAST WEEKS RECOMMENDATIONS:

All the three pairs did exceptionally well and all the recommendations achieved their targets with ease. The Star Performer for the week was Jindal SW which fell by a whopping 18%!!! 

PAIR NO.STOCKRec.priceTgt Reached Lot sizeProfit
1BuyABGShip3883994001000Rs. 12,000
SellCummins641592581500Rs. 30,000
2BuyBajajAuto146914951505250Rs. 9,000
SellJindalSW865823703250Rs. 40,500
3BuyIdea9498994000Rs. 20,000
SellWelCorp1481431401000Rs. 8,000
      ProfitRs.1,19,500

THIS WEEKS RECOMMENDATIONS:

This week is expected to be very volatile and hence Pair Strategies are suggested. 

PAIR NO.STOCKCMPSLTGT - 1TGT -2
1BuyPetronetLNG174170181189
SellBFUtility620648586550
2BuyOIL1321130513431366
SellGrasim2106213720622018
3Buy GMDC165161171178
SellMphasis422432407390

WATCH OUT FOR:

BFUtility

 

 

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