Archives : CORRECTION INTENSIFIES - 02/08/2013.

CORRECTION INTENSIFIES – 02/08/2013.

IMPORTANT SUPPORTS BREACHED.

Market was upset as the RBI in its policy review, left the interest rates unchanged which was expected but also scaled down economic growth projections; with no timeline given for easing liquidity. Inaction on the part of RBI made the bears stronger as they hammered down the market and in the process breached strong support levels. Both the first Upward Gap between 5889-5879 and the second Upward Gap between 5749-5699 got filled which has not only reversed the short term but the medium term trend as well.

 


CORRECTION INTENSIFIES – 02/08/2013.

IMPORTANT SUPPORTS BREACHED.

Market was upset as the RBI in its policy review, left the interest rates unchanged which was expected but also scaled down economic growth projections; with no timeline given for easing liquidity. Inaction on the part of RBI made the bears stronger as they hammered down the market and in the process breached strong support levels. Both the first Upward Gap between 5889-5879 and the second Upward Gap between 5749-5699 got filled which has not only reversed the short term but the medium term trend as well.

TECHNICALLY SPEAKING.

Sensex opened the week at 19714, made a high of 19751, low of 19078 and closed the week at 19164. Thus it registered a strong weekly loss of 584 points. At the same time the Nifty opened the week at 5869, made a high of 5886, low of 5649 and closed the week at 5677. Thus the Nifty went down by 209 points on a weekly basis.

On the daily charts, both the indices have formed black body candles everyday of the week except for Wednesday. Friday was no different as again both the indices formed a big black body candle. This formation came on the back of Three Black Crows formation which was completed a week before. This formation is a Bearish Reversal pattern which can translate into a trend reversal in higher timeframe which is currently being observed in the market. On the weekly charts, both Sensex and Nifty again formed a big black body candle. Thus both daily as well as weekly charts suggest bearishness to continue in the near term.

Both the indices fell after making a lower top at Sensex 20351 and Nifty 6093. In the process both the indices have filled the first Upward Gap between Sensex 19785-19723 and Nifty 5889-5879 and the Nifty also filled the second Upward Gap between 5749-5699 and in the process not only breached critical support level but also turned the Short term as well as the Medium term trend down.

Currently both the indices are currently undergoing a correction of the immediate rise from Sensex 18467 to 20351 and Nifty 5566 to 6093. The Correction levels are at 19631-19409-19186 for the Sensex and 5892-5829-5767 for the Nifty. Since both the indices have gone beyond the 61.8% Retracement level, we need to look at a larger correction of the rise from Sensex 15135 to 20443 and Nifty from 4531 to 6229. The corresponding correction levels are at Sensex 18416-17789-17163 and Nifty 5580-5380-5179.

Two weeks back Nifty gave a Rising Wedge bearish breakout and the target as per this breakout fell at Nifty 5715 which has been achieved this week.  Generally this occurs in an uptrend but here it has occurred in the middle of a downtrend and is acting as a bearish continuation pattern, so there is a possibility of it touching Nifty 5566, the point from where the rally started.

This week both the indices have closed below the medium term average of 50dma (Sensex – 19494 and Nifty – 5867). Also both the indices are already below the short term average of 20dma (Sensex – 19733 and Nifty – 5904) and the long term average of 200dma (Sensex – 19335 and Nifty – 5854). Thus the trend in the short term, medium term and long term timeframe is bearish.

After filling the two Upward Bullish Rising Gaps, now the market will test the most important Bullish Rising Gap between Sensex 18284-18062 and Nifty 5526-5447. Market has managed to bounce back number of times from above this Bullish Rising Gap. This gap was tested many times in the last few months and 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 and ROC both are negative and continue with their Sell signal. RSI (38) continues in Sell mode suggesting bearish momentum to continue. Stochastic Oscillator has signaled a Buy in oversold condition as %K (11) has gone above %D. MFI (37) has gone below the equilibrium line which suggests money flowing out of the market. ADX has gone up slightly but is still below 20 suggesting that the current trend has no strength. The Directional Indicators continue with its Sell signal as -DI is above +DI. OBV has gone below previous bottom and it continues in its Sell mode. Thus majority of the Oscillators points towards bearishness to continue in the near term.

The Nifty O.I. PCR has reduced and is now at 1.03. For the current month series, highest Open interest build up is seen at 5600 Put and 6000 Call. This suggests that the market expects a trading range with support coming in at 5600 levels and resistance around 6000 levels. Friday saw high amount of Call writing at 5900 strike which suggests strong resistance to come in at that level.

The Trendline Resistance for the Sensex is at 20332. The Trendline Support for the Sensex is at 18672.

The Trendline Resistance for the Nifty is at 6067. Trendline Support for the Nifty falls at 5618.

For the week ahead, Sensex will find Support at 18802-18467-18144 and will find Resistance at 19445-19723-20072.

For the week ahead, Nifty will find Support at 5566-5477-5378 and will find Resistance at 5775-5863-5951.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5378

5477

5566

5677

5775

5863

5951

Sensex

18144

18467

18802

19164

19445

19723

20072

LAST WEEKS RECOMMENDATIONS:

All the Recommendations of previous week reached their targets with ease. But the Star Performers of the week were Havells India and Coal India which went down by an amazing 21% and 11% respectively!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Sell ICICI

932

902

884

250

Rs. 12,000

HDFCBk

644

611

606

500

Rs. 19,000

CoalInd

282

265

250

1000

Rs. 32,000

BhrtFrg

207

191

191

1000

Rs. 16,000

Havells

754

717

597

500

Rs. 78,500

Total

Rs.1,57,500

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell UltraTech

1779

1806

1731

1683

Sell BajAuto

1909

1934

1862

1813

Sell M&M

855

875

819

782

Sell Kotak

654

675

622

590

Sell ReLInfra

312

319

301

289

WATCH OUT FOR:

ReL Infra

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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