Archives : MARKET TESTS 200DMA - 27/01/2012.

MARKET TESTS 200DMA   27/01/2012.

HAS THE LONG TERM TREND REVERSED?

This week was no different from last week as the market continued its show of strength and in the process breaking strong resistance levels. For the first time in this entire correction, indices have managed a close above the 61.8% Retracement level of the immediate previous fall. The question is whether the long term trend has reversed? In reply one needs to keep in mind that the market is just below the strong long term resistance in the form of 200dma (Sensex – 17331 and Nifty – 5204). In fact there is a strong confluence zone being formed between Nifty 5204 – 5254, crossover of which will determine the long term outlook of the market.

 

 

 


MARKET TESTS 200DMA   27/01/2012.

HAS THE LONG TERM TREND REVERSED?

This week was no different from last week as the market continued its show of strength and in the process breaking strong resistance levels. For the first time in this entire correction, indices have managed a close above the 61.8% Retracement level of the immediate previous fall. The question is whether the long term trend has reversed? In reply one needs to keep in mind that the market is just below the strong long term resistance in the form of 200dma (Sensex – 17331 and Nifty – 5204). In fact there is a strong confluence zone being formed between Nifty 5204 – 5254, crossover of which will determine the long term outlook of the market.

TECHNICALLY SPEAKING.

Sensex opened the week at 16667, made a high of 17258, low of 16659 and closed the week at 17233. Thus it registered a weekly gain of 494 points. At the same time the Nifty opened the week at 5025, made a high of 5217, low of 5021 and closed the week at 5204. Thus the Nifty went up by 156 points on a weekly basis.

Weekly candle stick pattern continues to be bullish even this week as a big Opening white body Marubuzo has been formed. Weekly charts continue to show lot of strength. On the daily charts, Nifty has formed a Hanging Man which is a Bearish Reversal pattern. On the other hand, the Sensex has formed a small white body with a long lower shadow and a small upper shadow. As a result the Sensex has just about avoided forming a bearish reversal pattern. If the show of strength is to continue then Nifty needs a close above 5217 which in turn will negate the Bearish Hanging Man pattern.

This week Nifty tested the long term average of 200dma (Sensex – 17331 and Nifty – 5204) whereas the Sensex is just below it. This indicates that the long term trend still remains down as both the indices are still below it. Medium and Short term Trend have reversed as the Sensex and Nifty continue to stay above their medium term average of 50dma (Sensex – 16098 and Nifty – 4830) and short term average of 20dma (Sensex – 16290 and Nifty – 4897). As a result the Short term and Medium term trends are Bullish, while the Long term trend continues to be Bearish.

Last week both Sensex and Nifty had left behind a Measuring Gap between Sensex 16214-16270 and Nifty 4880-4904, while climbing upwards. The target as per Gap Theory was Sensex 17349 and Nifty 5253 which are very near to current position of the market. Also the market completely removed the bearish effect of Bearish Island Reversal when the Sensex closed above 17003 and Nifty above 5099.

For more than a year, both the indices have been moving lower in a Falling Channel. Both Sensex and Nifty have now come very close to testing the upper end of the Falling Channel. This upper end i.e. Sensex 17355 and Nifty 5254 will provide strong Resistance in the coming week. The lower end of the Falling Channel which provides the support is at Sensex 14521 and Nifty 4347.

Both Sensex and Nifty have managed to overcome their previous minor tops at Sensex 17003 and Nifty 5099. Now the indices are approaching a strong confluence zone between Sensex 17331 – 17473 and Nifty 5204 – 5254. This zone is a result of the 38.2% Retracement level of the entire fall from Sensex 21108 to 15135 and Nifty 6338 to 4531, 50% of Intermediate fall from Sensex 19811 to 15135 and Nifty 5944 to 4531, top of the Falling Channel and the 200dma. Long term outlook of the indices will turn bullish if the market crosses this zone and continues to stay above this.

MACD and ROC continue with their Buy signals and are positive. RSI is moving higher and has reached overbought zone at 75. Stochastic Oscillator is in overbought zone since last two week as %K is at 97. Directional Indicators continue in Buy mode as +DI continues to remain above –DI. ADX has moved higher at 21, indicating positive trend being established. Bollinger band which had signaled a Buy in the previous week, continues to remain in buy mode. MFI has moved higher at 82 and is in overbought territory. OBV is in buy mode and is making a higher top higher bottom formation.

Nifty O.I. PCR is around 1.49. Highest Open Interest buildup is seen at 4800 Put. Highest Call writing is seen at 5200 strike. Friday saw a high Open Interest addition to 5000 Put. Hence one can expect Nifty to move in a band of 5000 on the lower side and 5200 on the higher side. 

Trendline Resistance for the Sensex is at 17493. Trendline Support for the Sensex is at 16871.

Trendline Resistance for the Nifty is at 5271. Trendline Support for the Nifty falls at 5102.

For the week ahead, Sensex will find Support at 16900-16572-16287 and will find Resistance at 17576-17926-18373.

For the week ahead, Nifty will find Support at 5099-4991-4877 and will find Resistance at 5311-5413-5529.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4877

4991

5099

5204

5311

5413

5529

Sensex

16287

16572

16900

17233

17576

17926

18373

LAST WEEKS RECOMMENDATIONS:

It was a fantastic week for all our readers as all the recommended stocks reached their targets with ease. However the Star Performers of the week was IOB and Titan which went up by 10% and 8% respectively!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy PNB

948

1010

1017

250

Rs.17,250

Buy Titan

191

206

207

2500

Rs.40,000

Buy BoB

779

817

830

250

Rs.12,750

Buy Opto

234

249

249

1000

Rs.15,000

Buy IoB

86

93

85

2000

Rs.18,000

Total

Rs.1,03,000

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy BhushanSt

349

344

357

366

Buy Praj Ind

90

88

94

99

Buy BGREng

246

341

254

263

Buy HindZinc

133

130

137

142

Buy JindalSW

542

533

556

572

WATCH OUT FOR:

Bhushan Steel

Praj

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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