Archives : SUPPORT ZONE HOLDS - 25/05/2012.

SUPPORT ZONE HOLDS – 25/05/2012.

NECESSARY TO CLOSE ABOVE NIFTY 4956.

The Support zone for the Nifty between 4843 – 4777 was once again tested successfully this week, courtesy a weakening Rupee and concern about the Euro zone. Both indices managed to stage a recovery from the support zone and in the process made a higher low Sensex 15847 and Nifty 4803. If the indices manage to close above the intermittent high of Sensex 16366 and Nifty 4956, then the pull-back rally will gain more legs. Immediate pull-back levels are 16429-16621-16812 for the Sensex and 4976-5034-5092 for the Nifty.

 


SUPPORT ZONE HOLDS – 25/05/2012.

NECESSARY TO CLOSE ABOVE NIFTY 4956.

The Support zone for the Nifty between 4843 – 4777 was once again tested successfully this week, courtesy a weakening Rupee and concern about the Euro zone. Both indices managed to stage a recovery from the support zone and in the process made a higher low Sensex 15847 and Nifty 4803. If the indices manage to close above the intermittent high of Sensex 16366 and Nifty 4956, then the pull-back rally will gain more legs. Immediate pull-back levels are 16429-16621-16812 for the Sensex and 4976-5034-5092 for the Nifty.

TECHNICALLY SPEAKING. 

Sensex opened the week at 16187, made a high of 16366, low of 15847 and closed the week at 16217. Thus it registered a weekly gain of 65 points. At the same time the Nifty opened the week at 4888, made a high of 4956, low of 4803 and closed the week at 4920. Thus the Nifty went up by 29 points on a weekly basis.

On the daily charts on Friday, Nifty has formed a small white body candle which is inside the previous days body, while the Sensex has formed a Doji. If we consider the candle formations as on Tuesday, Wednesday and Thursday then we can identify a Morning Star pattern which is a Bullish Reversal pattern. This pattern will stand negated only if the closing is below Sensex 15847 and Nifty 4803. On the weekly charts there is a Spinning Top formation with a long lower shadow and not so very long upper shadow. In case of the Sensex the weekly body is within the previous weeks body but that cannot be classified as Harami because the previous candle is a small body candle. Confirmation for the Bullish Reversal on the weekly charts is awaited, but the daily charts show more promise as there already is a Bullish Reversal pattern in place.

Currently the market is in a pull-back mode and it is necessary to look at the Retracement of the immediate fall from Sensex 17432 to 15809 and Nifty 5279 to 4788. The pull-back levels in that case works out to be 16429-16621-16812 for the Sensex and 4976-5034-5092 for the Nifty. If the upward price movement continues to gather more strength, then we will be considering Retracement of the entire fall from Sensex 18523 to 15809 and Nifty 5629 to 4788.  Thus the Pull-back levels for that will be 16846-17166-17487 for the Sensex and 5110-5209-5308 for the Nifty.

Both Sensex and Nifty continue to remain below the short term average of 20dma (Sensex – 16491 and Nifty – 4993). Also the indices continue to remain below the medium term average of 50dma (Sensex – 16975 and Nifty – 5154) and the critical long term average of 200dma (Sensex – 16810 and Nifty – 5071). As a result, the trend in the Long term timeframe, Medium term timeframe and the Short term timeframe continue to be Bearish. For the past two weeks both the indices have managed to stage a recovery after taking support at the 200 Weeks Moving Average (Sensex 16039 and Nifty 4822). Hence the level of 200 Weeks Moving Average assumes great significance, if the upward rally has to continue any further.

Both Sensex and Nifty have given a bearish breakout for the Falling Wedge pattern. The target as per this breakout falls at Sensex 15728 and Nifty 4742. But more often than not, a bearish breakout in a Falling Wedge is likely to result in the indices moving towards the point from where the rally has started and i.e. Sensex 15135 and Nifty 4531.

Market has now gone below the level of the Falling Channel Top which comes in at Sensex 16517 and Nifty 4989. These levels should now provide Resistance for the market. The overall bullish long term target for Falling Channel pattern breakout remains intact. The targets as per this formation are Sensex 20383 and Nifty 6148.

Market for the second week running took support at the Support zone formed by the confluence of 38.2% Retracement of the entire rise (Sensex from 7697 to 21108 and Nifty from 2252 to 6338), 61.8% Retracement of the intermediate rise (Sensex from 13219 to 21108 and Nifty from 3918 to 6338) and the 200 Weeks Moving Average (Sensex – 16039 and Nifty 4822). Thus the Support zone between Sensex 16233-15985 and Nifty 4843-4777 is a critical support zone and needs to hold, if the market is to make any further upward price movement.

There is a strong Resistance zone being formed between Sensex 16810-16846 and Nifty 5071-5110 which is a result of the confluence of 61.8% retracement of the immediate fall, 38.2% retracement of the entire fall and the critical 200dma. Thus any pull-back is likely to face strong test at this Resistance zone.

MACD has just given a Buy but it continues to be in negative terrain. ROC too is negative and hence continues with its Sell signal. RSI (40) has moved higher but is in Sell mode. While Stochastic Oscillator (%K at 29) has moved out of oversold zone and is signaling a Buy, since %K is above %D. MFI (41) has moved higher but continues with its Sell signal. ADX is at 35, which suggests that the downtrend is still strong. Directional Indicators continue in Sell mode as -DI is above +DI. The OBV continue in its Sell mode and so does the Bollinger Band.

Nifty O.I. PCR has gone up a little to 0.91. For the June series, highest open interest buildup is seen at 4500 Put and 5000 Call. On Friday the 4800 Call also has added significant open interest and hence can act as a support in the short term. In the immediate future, Nifty range is likely to range between 4800 on the lower side to 5000 on the higher side. 

Trendline Resistance for the Sensex is at 16689. The Trendline Support for the Sensex is at 15674.

Trendline Resistance for the Nifty is at 5041. The Trendline Support for the Nifty falls at 4849.

For the week ahead, Sensex will find Support at 15962-15664-15358 and will find Resistance at 16517-16828-17136.

For the week ahead, Nifty will find Support at 4837-4754-4675 and will find Resistance at 5011-5099-5197. 

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4675

4754

4837

4920

5011

5099

5197

Sensex

15358

15664

15962

16217

16517

16828

17136

LAST WEEKS RECOMMENDATIONS:

Star Performer for the week was IOC which went up by almost 7% !!!  

STOCK

Reco. Price

Target

Reached

Buy Bata

870

893

906

Buy NMDC

175

182

178

Buy IOC

271

288

289

Buy Delta

62

66

66

Buy WelCorp

123

127

125

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy JubFood

1246

1223

1280

1318

Buy ReLCap

320

313

333

348

Buy CanBk

396

390

407

419

Buy UBI

205

202

210

216

Buy Chambal

73

72

76

80

WATCH OUT FOR:

Jubiliant Food

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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