Archives : 5526-5441 - SUPPORT ZONE - 05/04/2013.

5526 – 5441 - SUPPORT ZONE – 05/04/2013.

200DMA BREACHED.

Finally it happened, the 200dma was breached convincingly this week. The pull-back witnessed at the start of the week was short lived as the bears took control and went for the kill. Now even the long term Trend of the market has turned Bearish. But in the near term, the market is very close to a strong Support Zone between Sensex 18284-17976 and Nifty 5526-5441. This Support Zone will be severely tested as the Nifty has completed a Bearish Head and Shoulders pattern and the target for that pattern falls at 5204.

  


5526 – 5441 - SUPPORT ZONE – 05/04/2013.

200DMA BREACHED.

Finally it happened, the 200dma was breached convincingly this week. The pull-back witnessed at the start of the week was short lived as the bears took control and went for the kill. Now even the long term Trend of the market has turned Bearish. But in the near term, the market is very close to a strong Support Zone between Sensex 18284-17976 and Nifty 5526-5441. This Support Zone will be severely tested as the Nifty has completed a Bearish Head and Shoulders pattern and the target for that pattern falls at 5204.

TECHNICALLY SPEAKING. 

Sensex opened the week at 18863, made a high of 19060, low of 18389 and closed the week at 18450. Thus it registered a weekly loss of 385 points. At the same time the Nifty opened the week at 5697, made a high of 5754, low of 5534 and closed the week at 5553. Thus the Nifty went down by 129 points on a weekly basis.

Both the indices made big black body candle on the weekly charts with a slightly long upper shadow which indicates continuation of bearishness. On the daily charts, both the indices made a small black body candle with small shadows but that is on the back of two Opening Black body Marubuzos for the Nifty and two big black body candles for the Sensex. Hence both Sensex and Nifty suggest continuation of bearishness as per the daily and weekly charts.

The indices continue to be below the short term average of 20dma (Sensex – 19082 and Nifty – 5754) and the medium term average of 50dma (Sensex – 19358 and Nifty – 5845). This week both the indices even breached the long term average of 200dma (Sensex – 18594 and Nifty – 5641) and have closed below it. Thus the trend in the short term and medium term was bearish, but that in the long term timeframe has also turned down.

Both the indices are currently very close to the Bullish Rising Gap between Sensex 18284-18062 and Nifty 5526-5447. 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.

If we consider the entire rally from low of Sensex 15135 and Nifty 4531 to a high of Sensex 20203 and Nifty 6111, then the retracement levels for the Sensex will be 18267-17669-17071 and 5507-5321-5134 for the Nifty.

If we consider the intermittent rally from the low of Sensex 15748 and Nifty 4770 to a high of Sensex 20203 and Nifty 6111, then the relevant correction levels for that will be at Sensex 18501-17976-17450 and 5599-5441-5282 for the Nifty.

On closer inspection we find that the 38.2% Retracement level of the entire rally i.e. Sensex 18267 and Nifty 5507 is very close to starting point of the Bullish Rising Gap (Sensex 18284 and Nifty 5526) and 50% of Intermittent rally i.e. Sensex 17976 and Nifty 5441 is very close to the lower end of the Bullish Gap (Sensex 18062 and Nifty 5447); thus forming a strong support zone between Sensex 18284 - 17976 and Nifty 5526 - 5441.

Both Sensex and Nifty had completed a Bearish Head and Shoulders pattern, the targets for which were Sensex 18519 and Nifty 5519. But three weeks back, both the indices have formed a larger Bearish Head and Shoulders pattern and the targets according to this pattern are Sensex 17250 and Nifty 5204. This is secondary pattern which has evolved from the smaller primary Head and Shoulders pattern. If Sensex were to close above 19754 and Nifty above 5971, then both Bearish Head and Shoulders patterns will stand negated.

MACD continues with its Sell signal besides being negative. ROC too is negative and continues with its Sell signal. RSI (32) too continues to show increase in bearish momentum. Stochastic Oscillator is in Sell mode as %K (08) is below %D, besides being oversold. MFI (38) is under Sell mode and signals money outflow. ADX has moved higher to 26, suggesting that the current down trend is now strong. The Directional Indicators continue in a Sell mode +DI continues to be below -DI. OBV continues in Sell mode besides making a lower top lower bottom formation. Majority of the Oscillators are suggesting bearishness to continue in the short term.

The Nifty O.I. PCR has reduced to 0.77. The lower value suggests that the Put writers must have suffered losses and as a result Put writing has reduced. If O.I.PCR falls further, then it can reach oversold conditions, from where a bounce-back can be expected. For the current series, highest Open interest build up has shifted to 5700 Call and 5500 Put. This suggests that the market expects a trading range for the Nifty with support at 5500 and resistance around 5700 levels.

Trendline Support for the Sensex is at 17897. Trendline Resistance for the Sensex is at 18915.

Trendline Support for the Nifty is at 5334. Trendline Resistance for the Nifty falls at 5700.

For the week ahead, Sensex will find Support at 18182-17884-17575 and will find Resistance at 18760-19060-19378.

For the week ahead, Nifty will find Support at 5447-5332-5260 and will find Resistance at 5663-5754-5863.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5260

5332

5447

5553

5663

5754

5863

Sensex

17575

17884

18182

18450

18760

19060

19378

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Target

Reached

Buy TCS

1575

1604

1575

Buy Lupin

628

646

645

Buy TechMah

1059

1086

1074

Buy ITC

309

315

310

Buy HindZnc

121

126

124

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell Grasim

2715

2740

2675

2633

Sell ICICI

998

1015

972

945

Sell M&M

838

851

819

799

Sell JubFood

1148

1164

1123

1096

Sell NMDC

125

128

120

115

WATCH OUT FOR:

M&M

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