Archives : BULLISH ISLAND REVERSAL - 14/06/2013.

BULLISH ISLAND REVERSAL – 14/06/2013.

MARKET FLIRTS WITH 200DMA.

After falling for the first four days of the week, the market staged a comeback when it recovered from the lows and made a big white body bullish candle. Market dropped below the 200dma for three days before Friday; but it recovered and managed to close above that level on Friday. Even as the market flirts with the long term trend, the slide in the Rupee continues to be the single biggest worry for the market. This week saw the Rupee reaching life time low levels of 59. Some pull-back may be witnessed this week but that will not change the down-trend, neither for the equity markets nor the rupee.

  


BULLISH ISLAND REVERSAL – 14/06/2013.

MARKET FLIRTS WITH 200DMA.

After falling for the first four days of the week, the market staged a comeback when it recovered from the lows and made a big white body bullish candle. Market dropped below the 200dma for three days before Friday; but it recovered and managed to close above that level on Friday. Even as the market flirts with the long term trend, the slide in the Rupee continues to be the single biggest worry for the market. This week saw the Rupee reaching life time low levels of 59. Some pull-back may be witnessed this week but that will not change the down-trend, neither for the equity markets nor the rupee.

TECHNICALLY SPEAKING. 

Sensex opened the week at 19530, made a high of 19585, low of 18765 and closed the week at 19177. Thus it registered a weekly loss of 252 points. At the same time the Nifty opened the week at 5907, made a high of 5931, low of 5683 and closed the week at 5808. Thus the Nifty went down by 73 points on a weekly basis.

A big black body candle has been formed on the weekly charts with a long lower shadow which is representative of the fact that a pull-back was witnessed by the close of the week. On the daily charts, if we consider last three days candle, it could have been an Abandoned Baby Bottom, but the first candle is small and hence the formation cannot be considered. Friday saw a gap-up opening for Sensex and Nifty; Sensex made a big Opening white body Marubuzo whereas the Nifty has formed a big white body candle. Hence the daily charts are suggesting a pull-back but the weekly charts are yet to certify that. Hence the weekly charts suggest continuation of bearishness.

This week, both the indices have registered a Bullish Island Reversal when Thursday’s small body candle was surrounded by gaps on both the sides. The Downward Falling gap is between 18969-18914 for the Sensex and 5736-5729 for the Nifty. Similarly the Upward Rising gap is between 18914-18952 for the Sensex and 5729-5739 for the Nifty. This Upward Rising gap is likely to act as a support. According to Gap Theory, a Bullish Island Reversal generates a Buy signal and one needs to Buy keeping the low registered during the Island Reversal as a Stop-loss.

If the market moves higher after the Bullish Island Reversal then one needs to check for the pull-back levels. The pull-back will of the fall from 20443 to 18765 for the Sensex and from 6229 to 5683 for the Nifty. The corresponding pull-back levels are 19406-19604-19802 for the Sensex and 5891-5956-6020 for the Nifty.

This week both Sensex and Nifty flirted with the long term average of 200dma (Sensex – 19121 and Nifty – 5800) before managing to close just above it on Friday. Both the indices are well below the medium term average of 50dma (Sensex – 194443 and Nifty – 5897) and also the short term average of 20dma (Sensex – 19669 and Nifty – 5962). Thus the trend in the short term and medium term timeframe continue to be bearish, whereas the trend in the long term timeframe has just managed to remain upwards.

Strong Support zone between Nifty 5853-5843 was breached last week and the target for the Bearish Head and Shoulders pattern (Sensex – 19055 and Nifty – 5728) got completed.

The Bullish Rising Gap between Sensex 18284-18062 and Nifty 5526-5447 was tested many times in the last couple of months and that gap has proved to be a strong support for the market. In fact this gap has consistently provided support to the market. This gap holds more significance because a breach of this gap will signal the end of the long term rally.

MACD continues in Sell mode and has turned negative. RSI (41) continues in Sell mode suggesting the momentum is bearish. ROC too is negative and continues with its Sell signal. Stochastic Oscillator has given a fresh Buy signal as %K (12) has gone above %D. MFI continues to fall and is well below the equilibrium line at 28, suggesting money continues to flow out. ADX has reduced to a level of 23, suggesting the current trend has almost all of its strength. The Directional Indicators continue with their Sell signal as –DI continues to stay above +DI. OBV too continues with its Sell signal making lower top lower bottom formation. On Tuesday, both Sensex and Nifty managed to close below the lower Bollinger Band and thus a Sell signal was generated according to Bollinger Band theory. Thus, majority of the Oscillators points towards continuation of bearishness in the short term.

The Nifty O.I. PCR has further reduced to 0.93. For the current series, highest Open interest build has shifted from 5800 Put to 5700 Put and 6000 Call. This suggests that the market expects a trading range for the Nifty with support coming in at 5700 and resistance around 6000 levels. Lot of Put writing was seen at the strike of 5800 on Friday, which suggests immediate support to come in at that level.

The Trendline Resistance for the Sensex is at 19394. The Trendline Support for the Sensex is at 18627. 

The Trendline Resistance for the Nifty is at 5867. The Trendline Support for the Nifty is at 5631.

For the week ahead, Sensex will find Support at 18873-18590-18255 and will find Resistance at 19434-19754-20036.

For the week ahead, Nifty will find Support at 5718-5604-5526 and will find Resistance at 5918-6019-6114.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5526

5604

5718

5808

5918

6019

6114

Sensex

18255

18590

18873

19177

19434

19754

20036

LAST WEEKS RECOMMENDATIONS:

All the major recommendations did well to reach their targets with the exception of NTPC. However the Star Performer of the week was Sesa Goa which went down by more than 10%!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Sell Bharti

288

280

274

1000

Rs.14,000

Siemens

576

557

543

500

Rs.16,500

Sell Idea

128

124

124

2000

Rs. 8,000

SesaGoa

154

144

138

2000

Rs.32,000

Sell NTPC

148

143

148

2000

Rs. 0

Total

Rs.70,500

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Lupin

783

771

800

818

Buy OBC

236

232

243

251

Buy Dena

84

82

87

91

Buy Rallis(I)

142

139

147

153

Buy GruhFin

235

231

242

250

WATCH OUT FOR:

Rallis

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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