Archives : SIGNS OF TIREDNESS - 01/02/2013.

SIGNS OF TIREDNESS – 01/02/2013.

SLUGGISH MARKET.

With headline inflation showing signs of peaking out, the RBI governor on Tuesday cut key interest rates Repo, Reverse Repo and the CRR by 25bps. This led to profit booking in the banks and made the markets choppy. Eventually the market dropped after reaching a higher level of Nifty 6111. Thus in the short term, the markets are trading with a negative bias and are sliding lower in search of support. Any further correction will be deemed healthy for the market. Support will be seen at the level of Nifty 5928-5933.


SIGNS OF TIREDNESS – 01/02/2013.

SLUGGISH MARKET.

With headline inflation showing signs of peaking out, the RBI governor on Tuesday cut key interest rates Repo, Reverse Repo and the CRR by 25bps. This led to profit booking in the banks and made the markets choppy. Eventually the market dropped after reaching a higher level of Nifty 6111. Thus in the short term, the markets are trading with a negative bias and are sliding lower in search of support. Any further correction will be deemed healthy for the market. Support will be seen at the level of Nifty 5928-5933.

TECHNICALLY SPEAKING. 

Sensex opened the week at 20139, made a high of 20203, low of 19736 and closed the week at 19781. Thus it registered a weekly loss of 322 points. At the same time the Nifty opened the week at 6082, made a high of 6111, low of 5983 and closed the week at 5998. Thus the Nifty went down by 76 points on a weekly basis.

Both Sensex and Nifty have formed a big black body candle on Friday in accordance with the short term downtrend. On the weekly charts too, a big black body candle has been registered which signals the bearish intent of the market in the short term. However, it just falls short of being an Evening Star pattern. But both daily and weekly candlestick patterns points towards short term bearishness.

Finally on Friday, the indices moved lower and breached the short term average of 20dma (Sensex – 19902 and Nifty – 6028) and hence the short term trend has turned down. However, the indices continue to remain above the medium term average of 50dma (Sensex – 19542 and Nifty – 5933), and the long term average of 200dma (Sensex – 18042 and Nifty – 5474). Thus the trend in the short term timeframe has turned down, while that in the medium and long term timeframes continues to remain bullish.

Short term trend has turned down and the candlestick pattern also suggest of short term bearishness, hence we consider minimum correction of the immediate rise of Sensex from 19149 to 20203 and Nifty from 5823 to 6111. Accordingly the minimum retracement levels for the Sensex will be 19800-19676-19551 and 6001-5967-5933 for the Nifty.

The 61.8% Retracement level of both the indices is likely to provide strong support as that level is in very close vicinity of Trendline support (Sensex 19507 and Nifty 5928) and the 50dma (Sensex – 19542 and Nifty – 5933). Thus zone between Sensex 19507-19551 and Nifty 5928-5933 is likely to act as a Support zone.

This week, both the indices completed a Bearish Rising Wedge pattern on the daily charts and the target accordingly falls at Sensex 19551 and Nifty 5903.

When the Sensex closed above 19612 & Nifty above 5965, a Flag formation on the weekly charts got completed. The Flag pole started from a low of Sensex 18255 and Nifty 5548 and the targets as per this formation are Sensex 20969 and Nifty 6382. The targets will be achieved as long as Sensex remains above 19149 and Nifty above 5823. Since the Sensex and Nifty are still way higher, the above mentioned targets are likely to be achieved.

Both the indices had bounced back from Sensex 18255 and Nifty 5548 which is within the Bullish Rising Gap between Sensex 18062-18284 and Nifty 5447-5526. This gap has acted as a strong support for the market even before as the Sensex had bounced back from a low 18291 and Nifty 5534. This gap holds more significance because a breach of this gap will signal the end of the current rally.

On the daily charts, both Sensex and Nifty had formed a Bullish Diamond pattern and the target as per this formation was Sensex 20171 and Nifty 6192. The target has been achieved in Sensex. Also 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.

On the weekly charts, both the indices have been moving higher in Flag formations and it had previously completed a Flag formation and the target according to the pattern comes in at Sensex 21024 and Nifty 6415. The targets will be achieved as long as the Sensex remains above 18255 and Nifty 5548. If we take the Saucer formation which is due to the fall from Sensex 18523 to 15748 and Nifty 5629 to 4770, then the target comes in at Sensex 21298 and Nifty 6488. Hence we have a Target zone of 21024 - 21298 on the Sensex and 6415 - 6488 on the Nifty.

MACD continues in Sell mode despite being positive. ROC is in Sell mode as it has moved lower below the centerline and has turned negative. The RSI at 49, too has given a fresh Sell as it has managed to go below the equilibrium line, indicating an increase in bearish momentum. Stochastic Oscillator remains in Sell mode as %K (40) is below %D. MFI continues to remain below the centerline at 43, which suggest money flowing out of the market. ADX has moved lower and is currently at 31, suggesting a reduction in the strength of the uptrend. The Directional Indicators have given a fresh Sell signal as +DI has gone below -DI. OBV too has started making lower top, lower bottom formation. Buy signal in Bollinger Band has been negated as the indices have closed below the mean of 20dma. Thus the oscillators have turned bearish.

The Nifty O.I. PCR is lower at 1.08. Highest Open interest build up is at 5700 Put and 6100 Call. This suggests that the market expects a trading range for the Nifty in the current month, with support coming in at 5700 and resistance around 6100 levels.

Trendline Support for the Sensex is at 19507. Trendline Resistance for the Sensex is at 20083.

Trendline Support for the Nifty is at 5928. Trendline Resistance for the Nifty falls at 6052.

For the week ahead, Sensex will find Support at 19508-19221-18973 and will find Resistance at 20036-20267-20538.

For the week ahead, Nifty will find Support at 5910-5823-5733 and will find Resistance at 6069-6151-6223.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5733

5823

5910

5998

6069

6151

6223

Sensex

18973

19221

19508

19781

20036

20267

20538

LAST WEEKS RECOMMENDATIONS: 

STOCK

Recom @

Target

Reached

Buy SBI

2513

2551

2535

Buy Maruti

1599

1621

1633

Buy L&T

1611

1636

1615

Buy Kotak

665

677

685

Buy Satyam

120

127

125

THIS WEEKS RECOMMENDATIONS:

This week is expected to be very volatile and hence Pair Strategies are suggested. 

PAIR NO.

STOCK

CMP

SL

TGT - 1

TGT -2

1

Buy

McDowell

1865

1848

1891

1918

Sell

Bharti

329

334

321

312

2

Buy

BPCL

422

414

435

449

Sell

PTC

74

76

71

68

3

Buy

SUNTV

479

472

489

500

Sell

Dena

107

109

104

100

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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