Archives : TWEEZER BOTTOM - 25/11/2011.
TWEEZER BOTTOM   25/11/2011.

KEY SUPPORTS BREACHED.

 

The market continued with its free fall this week with both Sensex and Nifty breaching their key support levels with ease. The critical support levels were the intermittent bottom formed at Sensex 15745 and Nifty 4720. The way the indices are breaking support levels does not augur well for the market; it suggests that the indices still have some way to go before forming a bottom. The indices are moving in a downward Falling Channel and a meaningful support is seen at Sensex 15013 and Nifty 4498 which is the lower trendline of the downward Falling Channel.

RELIEF RALLY LIKELY.

 

This week both Sensex and Nifty have formed a minor candlestick reversal pattern called the Tweezer Bottom but that does not mean that the bearishness is over. It only raises hope that one may finally see some sort of dead cat bounce in the market. These pull-backs will be short lived as the major time frame trends are all Bearish. Hence such relief rallies should be used to exit long positions if any and create shorts at higher levels.

 

 

 

 
TWEEZER BOTTOM   25/11/2011.

KEY SUPPORTS BREACHED.

 

The market continued with its free fall this week with both Sensex and Nifty breaching their key support levels with ease. The critical support levels were the intermittent bottom formed at Sensex 15745 and Nifty 4720. The way the indices are breaking support levels does not augur well for the market; it suggests that the indices still have some way to go before forming a bottom. The indices are moving in a downward Falling Channel and a meaningful support is seen at Sensex 15013 and Nifty 4498 which is the lower trendline of the downward Falling Channel.

RELIEF RALLY LIKELY.

 

This week both Sensex and Nifty have formed a minor candlestick reversal pattern called the Tweezer Bottom but that does not mean that the bearishness is over. It only raises hope that one may finally see some sort of dead cat bounce in the market. These pull-backs will be short lived as the major time frame trends are all Bearish. Hence such relief rallies should be used to exit long positions if any and create shorts at higher levels.

TECHNICALLY SPEAKING.

The Sensex opened the week at 16297, made a high of 16297, a low of 15478 and closed the week at 15695. The Sensex lost 676 points on a weekly basis. Similarly Nifty opened the week at 4873, made a high of 4873, a low of 4639 and closed the week at 4710. The Nifty too closed with a weekly loss of 195 points. 

Both Sensex and Nifty have formed a Tweezer Bottom at Sensex 15478 and Nifty 4639. On Wednesday and Thursday both the indices took support at the same level before staging a minor recovery. A Tweezer Bottom forms a support level and it is more significant if the Tweezer is a part of a Reversal pattern. Here a Bullish Harami pattern was formed by Thursday. This pattern requires a confirmation in the form of a white body candle on the next day, but that was not the case here as Friday saw a small black body being formed. This however does not dilute the support being provided by the Tweezer formation. Interestingly there is a San-Ku formation which means there are three falling gaps while the prices fell. The theory according to Sakata suggests that some pull-back can be expected as the indices will be oversold. On the weekly charts there is an Opening Black body Marubuzo, which again suggests of bearishness. So minor pull-back can be expected but the weekly pattern is still negative and hence one can expect the pull-back to be short-lived.

 

Assuming that the current low of 15478 on the Sensex and 4639 on the Nifty sustains, then one can expect some sort of pull-back of the current fall from Sensex 17908 to 15478 and Nifty 5399 to 4639.  The pull-back levels will be Sensex 16406-16693-16980 and Nifty 4929-5019-5109. The downtrend is likely to resume once the pull-back is over.

 

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 last weeks low of 15478 for the Sensex and 4639 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 bears were relentless in their attack as all the three trends continued to be bearish. Both Sensex and Nifty are below their short term average of 20dma (Sensex – 16889 and Nifty – 5074), medium term average of 50dma (Sensex – 16744 and Nifty – 5033) and long term average of 200dma (Sensex – 17836 and Nifty – 5355). As a result the short term, medium term and the long term trend continues to remain 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 15013 and Nifty 4498. 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 and is just hovering above the oversold zone at 31. Stochastic Oscillator is in oversold zone as %K is at 12 but the oscillator has been in oversold zone for more than a week now. Currently Stochastic Oscillator has signaled a Buy as %K is above %D and hence a possibility of a minor pull-back cannot be discarded in the short term. ADX has increased to 26 suggesting that the downtrend has now been established. Also Directional Indicators continue with their Sell signal as +DI is below –DI. MFI has bounced back from oversold territory and has moved higher at 36 while OBV too continues with its Sell mode as it continues with its lower top lower bottom formation. Prices have closed below the lower Bollinger Band last week and as a result the Bollinger Band had given a Sell signal. Currently the Sell signal continues.

Nifty OI PCR is at 1.38. OI PCR is less considering it is the beginning of the series. Put writers have lost heavily in the current fall and Put writing has taken a backseat as compared to Call writing. Highest Put writing is seen at 4500 strike followed by 4700 strike. Call writing is seen at 5000 strike. For the December series, one can expect a broad Nifty movement from 4500 on the lower side to 5000 on the higher side. 

Trendline Resistance for the Sensex is at 17183. Trendline Support for the Sensex is at 15013.

Trendline Resistance for the Nifty is at 5147. Trendline Support for the Nifty will be at 4498.

For the week ahead, Sensex will find Support at 15330-14987-14677 and will find Resistance at 16044-16408-16756.

For the week ahead, Nifty will find Support at 4591-4468-4353 and will find Resistance at 4812-4919-5034.

INDEX LEVELS: 

 S3S2S1CLOSER1R2R3
Nifty4353446845914710481249195034
Sensex14677149871533015695160441640816756
 

LAST WEEKS RECOMMENDATIONS:

All the stocks reached their targets with ease. The Star Performers of the week were JsW Steel and Max India which fell by around 12% and 8% resp.  

STOCKReco. PriceTgtReachedLot SizeProfit
Sell MaxInd1661551532000Rs.26,000
Sell JsWSteel610575535250Rs.18,750
Sell Petronet1581521522000Rs.12,000
Sell DivisLab712699693500Rs.9,500
Sell IOB9390892000Rs.8,000
    TotalRs.74,250
 

THIS WEEKS RECOMMENDATIONS:

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

PAIR NO.STOCKCMPSLTGT - 1TGT -2
1BuyGMDC176173182189
SellHDFC613624598582
2BuyTTKPrestige2596256326502714
SellHeroMoto2036206519971953
3Buy OnMobile67657175
SellRPower85878176

WATCH OUT FOR:

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HDFC

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