Archives : DRAGON-FLY DOJI ON SENSEX - 18/11/2011.

DRAGON-FLY DOJI ON SENSEX   18/11/2011.

SUPPORTS ARE MEANT TO BE BROKEN.

The Bears started the week with a vengeance as they went hammer and tongs in the market, giving no respite to the Bulls. It was a relentless hammering of the bulls as the market went down breaking the so called ‘support levels’ with ease. It was surprising that the level of Nifty 5000 was taken out so easily without much of a fight from the bulls. In the process the short and medium term trends have turned negative along with the long term trend. Such was the speed of the fall that the market is currently oversold in the short term charts and hence one can expect some sort of a pull-back but that will not be a reversal of the downtrend, it will be more of a relief rally.

 

 

 

   

DRAGON-FLY DOJI ON SENSEX   18/11/2011.

SUPPORTS ARE MEANT TO BE BROKEN.

The Bears started the week with a vengeance as they went hammer and tongs in the market, giving no respite to the Bulls. It was a relentless hammering of the bulls as the market went down breaking the so called ‘support levels’ with ease. It was surprising that the level of Nifty 5000 was taken out so easily without much of a fight from the bulls. In the process the short and medium term trends have turned negative along with the long term trend. Such was the speed of the fall that the market is currently oversold in the short term charts and hence one can expect some sort of a pull-back but that will not be a reversal of the downtrend, it will be more of a relief rally.

 

TECHNICALLY SPEAKING.

The Sensex opened the week at 17348, made a high of 17391, a low of 16164 and closed the week at 16371. The Sensex lost 821 points on a weekly basis. Similarly Nifty opened the week at 5217, made a high of 5228, a low of 4837 and closed the week at 4905. The Nifty too closed with a weekly loss of 263 points.

Sensex has formed a Bullish Reversal pattern on the daily charts called the Dragon-Fly Doji. This Doji can act as reversal pattern if formed while the prices are moving lower. On the other hand Nifty has formed a White Body Hammer like formation, but cannot be termed as Hammer because of the presence of the small upper shadow. But the long lower shadow on both Sensex and Nifty shows some support being found at lower levels. On the weekly charts both Sensex and Nifty have formed big black body candle. This is the third consecutive black body candle formed but the entire formation cannot be qualified as Three Black Crows because the size of the previous two weeks body was small. It failed to form Rising Three Method as the indices closed below Sensex 16898 and Nifty 5084 levels. In short the weekly candlestick pattern continues with its bearishness but the daily candlestick pattern suggests some sort of minor pull-back.

 

Considering the bullish candlestick formation on the daily charts, one can expect some sort of pull-back of the current fall from Sensex 17908 to 16164 and Nifty 5399 to 4837. Here assuming that the current low i.e. Sensex 16164 and Nifty 4837 stays intact, one can expect retracement of the current fall and the levels will be Sensex 16830-17036-17242 and Nifty 5052-5118-5184. The downtrend is likely to resume once the pull-back is over. On the lower side one can expect a retest of the previous intermediate bottom i.e. Sensex 15745 and Nifty 4720.

From a broader perspective the market is correcting the entire rise from 7697 to 21108 for the Sensex and 2252 to 6338 for the Nifty. If the market breaches and closes below the intermediate low of 15745 for the Sensex and 4720 for the Nifty, then the market is likely to move towards the next Fibonacci Retracement levels of 50% and 61.8% levels of the entire fall for the Sensex and Nifty. Those levels are 14402-12820 for the Sensex and 4295-3813 for the Nifty.

This week the medium term trend has joined the short and long term trend by turning bearish. Both Sensex and Nifty are below the short term average of 20dma (Sensex – 17176 and Nifty – 5164) and as a result the short term trend continues to be Bearish. This week both the indices have closed below their medium term average of 50dma (Sensex – 16848 and Nifty – 5064). As a result the medium term trend has also turned down. Both the indices continue to remain below the 200dma (Sensex – 17896 and Nifty – 5373). As a result the long term trend continues to remain down. Moving Average Trend Analysis clearly suggest that the short term, medium term and the long term trends are clearly down.

Since last Deepawali, both the indices have been moving lower in a Falling Channel and the bottom end of the Falling Channel falls at Sensex 15055 and Nifty 4511. This level should act as good Support. On a longer term timeframe the Bearish Head & Shoulders and Bearish Descending Triangle on the weekly charts still stand, and so do their targets. The target for the Bearish Head and Shoulders pattern on the weekly charts stands at Sensex 14651-13928 and Nifty 4357-4143. This target holds true as long as the Nifty stays below 5740.

MACD and ROC are in Sell mode and both are in negative territory. RSI too is in Sell mode at 35. Stochastic Oscillator is in oversold zone and some minor pull-back can be expected in the short term. ADX continues to remain low at 18 suggesting that the index is in sideways mode. Directional Indicators have given a Sell signal as +DI is below –DI. MFI continues to remain below the centerline at 22 and as a result it continues with its Sell indication. OBV too is in Sell mode as it has breached the precious low and hence continues with its lower top lower bottom formation. Prices have closed below the lower Bollinger Band and as a result the Bollinger Band had given a Sell signal on Thursday. Currently the Sell signal continues.

Nifty OI PCR is extremely oversold at 0.74. The market experienced a steep one sided fall where there was little respite for the Put writers. As a result, they have lost heavily in the current fall and Put writing has taken a backseat as compared to Call writing. Hence we find the OI PCR to be near oversold levels. Strong Call writing is seen at 5200 strike and Put writing is seen at strikes of 4700 and 4800. Since the indicator is nearing oversold levels, one can expect some sort of support emerging in the very short term.

 

Trendline Resistance for the Sensex is at 17185. Trendline Support for the Sensex is at 15781.

 

Trendline Resistance for the Nifty is at 5149. Trendline Support for the Nifty will be at 4738.

 

For the week ahead, Sensex will find Support at 16015-15651-15332 and will find Resistance at 16673-16989-17295.

 

For the week ahead, Nifty will find Support at 4786-4675-4538 and will find Resistance at 4998-5084-5177.

 

 

INDEX LEVELS:

.

 S3S2S1CLOSER1R2R3
Nifty4538467547864905499850845177
Sensex15332156511601516371166731698917295
 

LAST WEEKS RECOMMENDATIONS:

Majority of the stocks reached their targets with the exception of Wipro and IGL which missed their targets by just a whisker. The Star performer of the week was HeroHonda. 

STOCKReco. PriceTgtReachedLot SizeProfit
Buy HeroHonda217222132250250Rs.19,500
Buy Wipro382392389500Rs.3,500
Buy UltraTech117611961196250Rs.5,000
Buy IGL4284394371000Rs.9,000
Buy BajajAuto174517681775250Rs.7,500
    TotalRs.44,500
 

THIS WEEKS RECOMMENDATIONS:  

STOCKCMPSLTgt-1Tgt-2
Sell MAXIndia166169161155
Sell JSW Steel610621593575
Sell PetronetLNG158162152145
Sell DivisLab712720699685
Sell IOB93959086
  

WATCH OUT FOR:

 
Max Ind
  
PetronetLNG
  
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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