Archives : BETWEEN TWO GAPS - 13/07/2012.

BETWEEN TWO GAPS – 13/07/2012.

INFOSYS PLAYS SPOIL-SPORT.

The market momentum was broken abruptly when Infosys declared their quarterly results which were lower than market expectations. The main culprit behind the fall in Infosys stock was not just poor results but the refusal of the company to give quarterly guidance. Along with this, the company painted a depressing picture of the current business scenario, which led to a fall of around 10% in the stock price. This broke the positive momentum the market was trying to build over past two weeks and as a result the market is now undergoing a correction in the short term timeframe.

 

 

 


BETWEEN TWO GAPS – 13/07/2012.

INFOSYS PLAYS SPOIL-SPORT.

The market momentum was broken abruptly when Infosys declared their quarterly results which were lower than market expectations. The main culprit behind the fall in Infosys stock was not just poor results but the refusal of the company to give quarterly guidance. Along with this, the company painted a depressing picture of the current business scenario, which led to a fall of around 10% in the stock price. This broke the positive momentum the market was trying to build over past two weeks and as a result the market is now undergoing a correction in the short term timeframe.

TECHNICALLY SPEAKING. 

Sensex opened the week at 17449, made a high of 17631, low of 17181 and closed the week at 17213. Thus it registered a weekly loss of 308 points. At the same time the Nifty opened the week at 5283, made a high of 5348, low of 5216 and closed the week at 5227. Thus the Nifty went down by 89 points on a weekly basis.

Both the indices had formed a Bearish Harami pattern if we are to consider the pattern formation on Tuesday and Wednesday. Thursday and Friday both formed small black body candles. On the weekly charts there is a small black body formation with a long upper shadow. It represents bearish prospects for the market. The bearishness would have been stronger; had the weekly candle formed a bigger black body candle than what it is currently.

Both Sensex and Nifty fell on Thursday while forming a small black body candle but left behind a Downward Bearish Gap between Sensex 17582-17329 and Nifty 5300-5261. Market tested this gap on Friday but failed to fill the gap, hence this gap will now act as a resistance. On the downside, both Sensex and Nifty have left behind a Bullish Rising Gap between Sensex 17134-17033 and Nifty 5189-5159. If we consider this as a Measuring Gap, then the target according to the Measuring Gap falls at Sensex 18419 and Nifty 5578. But more importantly, in the near term, one can expect support at this gap i.e. between Sensex 17134-17033 and Nifty 5189-5159. Thus further journey of the market will be determined by which gap the market fills first.

Currently the markets are undergoing correction in a very short term time frame i.e. correction of the rise from Sensex 15748 to 17361 and Nifty 4770 to 5348. The correction levels are thus placed at 16912-16690-16469 for the Sensex and 5127-5059-4991 for the Nifty.

On a longer time frame both Sensex and Nifty are undergoing a pull-back of the entire fall from Sensex 21108 to 15135 and Nifty from 6338 to 4531. This pull-back will resume once the Sensex closes above 17631 and Nifty 5348. The pull-back levels are 17417-18122-18827 for the Sensex and 5221-5434-5648 for the Nifty.

Both Sensex and Nifty are comfortably above the long term average of 200dma (Sensex – 16847 and Nifty – 5091) and medium term average of 50dma (Sensex – 16704 and Nifty – 5064). The short term average of 20dma (Sensex – 17196 and Nifty – 5215) was successfully tested twice this week without getting breached. As a result, the trend in the Long term timeframe, Medium term timeframe and the Short term timeframe continue to be all Bullish.

Market is now well above the level of the Falling Channel Top which comes in at Sensex 16100 and Nifty 4869. These levels should now provide Support 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.

There is a strong Support zone between Sensex 16815 – 16799 and Nifty 5095 – 5091, formed by the confluence of the critical long term average i.e. the 200dma and minor intermediate bottoms almost like Tweezers around Sensex 16799 to 16815 and Nifty 5093 to 5095.

MACD has given a fresh Sell but is still in positive territory. ROC continues in its Buy mode as it is in positive territory. RSI has dropped dramatically to 53, suggesting a break in momentum. Stochastic Oscillator is in Sell mode as %K (60) has moved below %D. MFI has moved lower but still it is at 60, and hence continues with its Buy mode. The Directional Indicators continue to remain in Buy mode as +DI is above –DI. However the Directional Indicators have started converging. ADX is still strong at 33 which suggest that uptrend is still having strength. OBV is still in Buy mode. Bollinger Band too, continues in its Buy mode. The mean i.e. the 20dma was tested twice this week, if the indices close below this level, then the Buy signal of the Bollinger Band will stand cancelled. Daryl Guppy, which is a medium to long term indicator, continues with its Buy signal. Oscillators are suggesting that the market may correct in the short term timeframe but in the higher timeframe the market still remains positive.

The Nifty O.I. PCR is at 1.32 which suggests that the outlook for the market remains in balance. For the July series, highest open interest buildup is seen at 5000 Put and 5400 Call. Thus the Nifty is likely to range between 5000 on the lower side to 5400 on the higher side. Also the 5300 Call has seen a strong addition in Open Interest, which suggests that in the immediate near term, the market expects strong resistance to come in around 5300 levels. 

Trendline Resistance for the Sensex is at 17709. The Trendline Support for the Sensex is at 17161.

Trendline Resistance for the Nifty is at 5407. The Trendline Support for the Nifty falls at 5187.

For the week ahead, Sensex will find Support at 16918-16636-16295 and will find Resistance at 17530-17890-18182.

For the week ahead, Nifty will find Support at 5125-5039-4932 and will find Resistance at 5333-5428-5531.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4932

5039

5125

5227

5333

5428

5531

Sensex

16295

16636

16918

17213

17530

17890

18182

LAST WEEKS RECOMMENDATIONS:

Last week McDowell and BFUtility did reasonably well and achieved their targets easily. While recommendations of Yes Bank, ACC and IRB failed to fire this week and hence could not reach their respective targets. 

STOCK

Reco. Price

Tgt

Reached

Buy McDowell

757

781

784

Buy YesBnk

361

371

364

Buy ACC

1296

1335

1296

Buy BFUtility

464

479

489

Buy IRB

137

142

137

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Aban

428

420

441

455

Buy Lupin

554

546

568

584

Buy GodrejInd

251

246

259

268

Buy Havells

588

579

601

615

Buy DCB

47

46

50

53

WATCH OUT FOR:

Godrej Ind

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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