Archives : BEARISH ENGULFING ON DAILY CHARTS - 05/10/2012.

BEARISH ENGULFING ON DAILY CHARTS – 05/10/2012.

SHALLOW MARKET.

Friday’s trading session was dominated by the freak trade which occurred on NSE, as a result of which the Nifty went down by more than 18% to make a low of 4888. Surprisingly there were no circuit filters working as some front line stocks slipped anywhere between 10 to 20%. This once again highlights the point that our market is very shallow and can crash easily on sudden selling pressure.

RETRACEMENT WILL BE HEALTHY.

Even though the market recovered somewhat from the lows, both the indices have managed to register a bearish price reversal pattern on the daily charts. This indicates a price reversal in the very short term time frame, which may or may not result in trend reversal in higher time frame. Many indicators are overbought, which may result in a consolidation or minor retracement of price. This will be healthy for the market considering the strong upward movement of more than 600 points on the Nifty.

  


BEARISH ENGULFING ON DAILY CHARTS – 05/10/2012.

SHALLOW MARKET.

Friday’s trading session was dominated by the freak trade which occurred on NSE, as a result of which the Nifty went down by more than 18% to make a low of 4888. Surprisingly there were no circuit filters working as some front line stocks slipped anywhere between 10 to 20%. This once again highlights the point that our market is very shallow and can crash easily on sudden selling pressure.

RETRACEMENT WILL BE HEALTHY.

Even though the market recovered somewhat from the lows, both the indices have managed to register a bearish price reversal pattern on the daily charts. This indicates a price reversal in the very short term time frame, which may or may not result in trend reversal in higher time frame. Many indicators are overbought, which may result in a consolidation or minor retracement of price. This will be healthy for the market considering the strong upward movement of more than 600 points on the Nifty.

TECHNICALLY SPEAKING. 

Sensex opened the week at 18784, made a high of 19137, low of 18745 and closed the week at 18938. Thus it registered a weekly gain of 176 points. At the same time the Nifty opened the week at 5704, made a high of 5815, low of 4888 and closed the week at 5746. Thus the Nifty went up by 43 points on a weekly basis.

A Bearish Engulfing pattern was completed on the daily charts on Friday which is a bearish reversal pattern. The black body formed on Friday, completely engulfs not only the previous days white body but also the shadows, which makes it a stronger reversal. On the weekly charts the situation is slightly better. Sensex has formed a white body candle which is in line with the uptrend. The candle has slight long upper shadow which indicates selling pressure at higher levels.

If we consider primary basic pattern which involves fall from Sensex 17432 to 15748 and Nifty 5279 to 4770, then the overall target for this pattern is at Sensex 19116 and Nifty 5788. The targets have been achieved this week and as a result the indices are seeing profit booking at those levels.

A Bullish Rising Gap between Sensex 18062-18284 and Nifty 5447-5526 is also a Measuring Gap and the target according to Gap theory falls at Sensex 19096 and Nifty 5758, which has been achieved this week. This gap has also acted as a strong support for the market as the Sensex bounced back from a low 18291 and Nifty 5534. This gap holds more significance now than before because the 50% Retracement of the immediate rise from 17250 to 19137 for the Sensex and 5215 to 5815 for the Nifty (which is at 18193 and 5515) is also within the Gap mentioned above.

Both Sensex and Nifty have closed above their previous intermittent top i.e. Sensex has closed above 18523 and Nifty above 5629. This has ensured a higher top, higher bottom formation on the weekly charts.

Both Sensex and Nifty needed to close above their 61.8% Retracement of the entire fall from Sensex 21108 to 15135 and Nifty 6338 to 4531, which was at Sensex 18827 and Nifty 5648. Both the indices have closed above their respective levels, which have ensured that the long term correction is completed.

On the weekly charts, both Sensex and Nifty have formed a Bullish Diamond pattern and the target as per this formation is Sensex 20171 and Nifty 6192. The targets will be achieved as long as the market stays above Sensex 15748 and Nifty 4770.

Once again this week both Sensex and Nifty are well above their short term average of 20dma (Sensex – 18435 and Nifty – 5584), medium term average of 50dma (Sensex – 17842 and Nifty – 5405) and the long term average of 200dma (Sensex – 17189 and Nifty – 5208). Thus the trend in the short term, medium term and the long term timeframe continue to be bullish.

Market had tested the Falling Channel Top and bounced back from there. Hence the overall long term target for Falling Channel pattern breakout remains intact. The targets as per this formation are Sensex 20383 and Nifty 6148.

MACD and ROC continue with their buy signals and both are in positive territory. RSI (70) continues in overbought zone and same is the case with Stochastic Oscillator which too is in overbought zone as %K is at 90. ADX has moved further up to 42 which suggest that the current uptrend is very strong but also maturing. Also the Directional Indicators continue in buy mode as +DI is way above –DI. MFI has moved lower to 56 which is still above the equilibrium line. OBV continues to remain in Buy mode and so does the Bollinger Band.

The Nifty O.I. PCR has reduced slightly to 1.11. Highest Open interest build up is seen at 6000 Call and 5500 Put which suggests that the market expects a wide trading range with strong support coming in at around 5500 and resistance at around 6000 levels. Friday saw increased Call writing at the strike of 5800 which means that the market will face resistance at that level. Short covering was visible at 5700 Put which indicates that the strength of the support at that level has reduced.

Trendline Support for the Sensex is at 18332. Trendline Resistance is at 19171.

Trendline Support for the Nifty falls at 5551. Trendline Resistance falls at 5798.

For the week ahead, Sensex will find Support at 18619-18349-18023 and will find Resistance at 19227-19530-19811.

For the week ahead, Nifty will find Support at 5638-5534-5435 and will find Resistance at 5850-5944-6037.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5435

5534

5638

5746

5850

5944

6037

Sensex

18083

18349

18619

18938

19227

19530

19811

LAST WEEKS RECOMMENDATIONS:

Majority of the recommendations did well except for JsW Steel and ABB. But the star performers of the week were Havells India and OFSS which went up by around 5% and 4% respectively!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy OFSS

3009

3067

3126

125

Rs.14,625

Buy JsWSt

756

776

765

500

Rs. 4,500

Buy ABB

800

821

811

250

Rs. 2,750

Buy Havells

624

641

656

500

Rs.16,000

AdaniPort

127

131

132

2000

Rs.10,000

Total

Rs.47,875

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy CoLPaL

1241

1227

1262

1284

Buy STFC

646

635

662

679

Buy BomDye

538

523

557

577

Buy Federal

457

449

471

486

Buy OptoCkt

138

135

143

149

WATCH OUT FOR:

Federal Bank

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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