Archives : FALLING THREE METHODS - 02/03/2012.

FALLING THREE METHODS 02/03/2012.

SHORT TERM TREND TURNS BEARISH.

The market continued to correct for the second straight week. Monday was a strong Bearish day but after that the remaining four days were idle days as they did not do much except move within the trading range of the Bearish candle. A closing below the low of Sensex 17381 and Nifty 5268 will confirm a Bearish Reversal Pattern. Strong Support is likely to emerge around Sensex 17229 – 17183 and Nifty 5210 – 5167 which is a confluence zone formed by the 38.2% Retracement of the current rise and the 200dma. The Short term trend has turned Bearish whereas the Medium and Long term trend still continues to be Bullish.

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FALLING THREE METHODS 02/03/2012.

SHORT TERM TREND TURNS BEARISH.

The market continued to correct for the second straight week. Monday was a strong Bearish day but after that the remaining four days were idle days as they did not do much except move within the trading range of the Bearish candle. A closing below the low of Sensex 17381 and Nifty 5268 will confirm a Bearish Reversal Pattern. Strong Support is likely to emerge around Sensex 17229 – 17183 and Nifty 5210 – 5167 which is a confluence zone formed by the 38.2% Retracement of the current rise and the 200dma. The Short term trend has turned Bearish whereas the Medium and Long term trend still continues to be Bullish.

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TECHNICALLY SPEAKING.

Sensex opened the week at 17975, made a high of 18001, low of 17381 and closed the week at 17636. Thus it registered a weekly loss of 287 points. At the same time the Nifty opened the week at 5448, made a high of 5458, low of 5268 and closed the week at 5359. Thus the Nifty fell by 70 points on a weekly basis.

Both Sensex and Nifty have once again formed a Bearish Black body candle on the weekly charts which points towards continuation of Bearish trend. On the daily charts, a Spinning Top formation has been formed on Friday which is a neutral formation. Interestingly if we consider last five days candle formation then both the indices are in the process of forming a Falling Three Methods which is a Bearish Continuation pattern. On Monday, both the indices registered a big black body candle and after that all the remaining four days formed small body candles such that their bodies were within the High-Low range of the first days black candle. These four days can be termed as ‘rest days’. A Bearish candle which closes below the low of Mondays big black body candle (Sensex – 17381 and Nifty – 5268) will confirm that the Falling Three Methods formation has been completed and the prior Bearish trend will resume.

This week both the indices have moved below the short term average of 20dma (Sensex – 17860 and Nifty – 5418) and as a result the short term trend has turned Bearish. But the indices still continue to remain above the crucial level of 200dma (Sensex – 17183 and Nifty – 5167) and also above their medium term average of 50dma (Sensex – 16922 and Nifty – 5106). As a result, the trend in the Short term timeframe has turned bearish but the trend in the Medium term timeframe and Long term timeframe continue to be Bullish.

Both Sensex and Nifty registered an intermittent top last week. Sensex fell after making a high of 18523 and Nifty 5629. As a result the market is now correcting the entire rise from Sensex 15135 to 18523 and Nifty from 4531 to 5629 and the Correction levels are 17229-16829-16429 for the Sensex and 5210-5080-4950 for the Nifty.

A strong support is likely to emerge between Sensex 17229 – 17183 and Nifty 5210 – 5167 which is a result of confluence of 38.2% Retracement of the entire rise of the Sensex from 15135 to 18523 and Nifty 4531 to 5629 and the critical level of 200dma.

The market is likely to restart its upward journey post the correction. The overall bullish picture suggests that the target for Falling Channel pattern breakout remains intact. The targets as per this formation are Sensex 20383 and Nifty 6148.

MACD continues with its Sell signal this week but is still in positive territory. ROC too is in Sell mode as it has marched into negative territory. RSI has once again moved above the equilibrium line and is at 52. Stochastic Oscillator (%K) has moved lower down to 25 but is in Buy mode as %K has moved above %D. ADX has now reduced to 35 suggesting that the uptrend is undergoing some consolidation. Directional Indicators are in Buy mode as +DI is above –DI. The Buy signal given by the Bollinger band has now hit the Stop-loss level as the index has moved below the 20dma. MFI is still above the centerline at 63 after signaling a negative divergence on the daily charts. OBV continues in buy mode as a lower bottom is yet to be formed.

Nifty O.I. PCR is reduced to a more reasonable 1.33. Highest open interest buildup has shifted lower to 5200 Put. High Call writing is now seen at the strike of 5600. The range for the market has clearly widened by 200 points as compared to previous week. This normally happens before a big ticket event like the Budget. It shows that traders are building up their positions expecting the trading range for the market to be 5200 on the lower side and 5600 on the higher side in the immediate future. 

Trendline Resistance for the Sensex is at 18464 while Trendline Support is at 17429.

Trendline Resistance for the Nifty is at 5623 while Trendline Support falls at 5295.

For the week ahead, Sensex will find Support at 17358-17071-16788 and will find Resistance at 17945-18231-18523.

For the week ahead, Nifty will find Support at 5268-5177-5076 and will find Resistance at 5444-5542-5629.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5076

5177

5268

5359

5444

5542

5629

Sensex

16788

17071

17358

17636

17945

18231

18523

LAST WEEKS RECOMMENDATIONS:

The Star Performer for the week was Godrej Ind which went up by around 5%. While Power Grid and ITC failed to reach their targets. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

CoLPaL

1056

1081

1080

250

Rs.6,000

Godrej

251

260

265

1000

Rs. 14,000

PowGrid

114

118

115

4000

Rs. 4,000

ITC

209

215

214

2000

Rs.10,000

Videocon

188

195

195

2000

Rs.14,000

Total

Rs.48,000

 THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy SunPharma

566

559

579

593

Buy Aurobindo

120

117

125

131

Buy IndusInd

316

311

324

333

Buy Dabur

105

103

108

112

Buy Castrol

490

483

502

515

 WATCH OUT FOR:

Aurobindo Pharma

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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