Archives : MARKET TAKES SUPPORT @ 200DMA - 07/02/2014.

MARKET TAKES SUPPORT @ 200DMA –  07/02/2014.

PULL-BACK & NOT A REVERSAL.

Bears found it very difficult to break the 200dma on closing basis, even though they managed to take both the indices well below it on Tuesday. But somehow intra-day recovery saw the market pull-back and close above it. The 200dma was again tested on Wednesday as well as Thursday, but bears were not able to breach that as the market bounced back from that level. As a result the Nifty not only managed to hold the 200dma, but also close well above the psychological level of 6000. The market is witnessing a pull-back from the lows, and one should not confuse this as a reversal.

 

 


MARKET TAKES SUPPORT @ 200DMA –  07/02/2014.

PULL-BACK & NOT A REVERSAL.

Bears found it very difficult to break the 200dma on closing basis, even though they managed to take both the indices well below it on Tuesday. But somehow intra-day recovery saw the market pull-back and close above it. The 200dma was again tested on Wednesday as well as Thursday, but bears were not able to breach that as the market bounced back from that level. As a result the Nifty not only managed to hold the 200dma, but also close well above the psychological level of 6000. The market is witnessing a pull-back from the lows, and one should not confuse this as a reversal.

TECHNICALLY SPEAKING.

Sensex opened the week at 20479, made a high of 20480, low of 19963 and closed the week at 20376. Thus it registered a weekly loss of 137 points. At the same time the Nifty opened the week at 6058, made a high of 6079, low of 5933 and closed the week at 6063. Thus the Nifty closed the week with a loss of 26 points.

On the daily charts, both Sensex and Nifty have formed a small black body candle with a long lower shadow. This long lower shadow suggests selling done by the bears during the course of the day. On the weekly charts Sensex has formed a Bullish Hammer pattern which has a small black body and a long lower shadow. The long lower shadow in this case suggests buying support at lower levels. The Nifty has formed a small body candle with long lower shadow and a small upper shadow. Thus the weekly pattern suggests a bullish bias in the near term.

The current downward rally has seen formation of two Bearish Gaps on the daily charts which are likely to act as resistances going forward. The first Bearish Gap between Sensex 20572-20613 & Nifty 6097-6109 is likely to act as strong resistance. But the next Bearish Gap between Sensex 20899-21123 & Nifty 6188-6263 holds greater significance as it matches with the formation of weekly Bearish gap as well i.e. Sensex 20899-21001 and Nifty 6188-6243. Hence both these Bearish Gaps are likely to act as strong resistances going forward.

Both the indices are witnessing a pull-back from lower levels. The pull-back levels of the fall from Sensex 21483 to 19963 and Nifty 6415 to 5933 are 20544-20723-20902 for the Sensex and 6117-6174-6231 for the Nifty.

On a larger degree, the Market is undergoing a Correction of the medium term rally from 17448 to 21483 for the Sensex and 5118 to 6415 for the Nifty. Accordingly the Intermediate Retracement levels fall at Sensex 19942-19466-18990 and 5920-5767-5614 for the Nifty. This week both Sensex and Nifty has rebounded from the 38.2% Retracement of above mentioned rally.

A Bearish Rising Wedge formation got completed sometime back and the target as per this formation works out to be Sensex 19706 and Nifty 5841. The target is likely to be achieved as long as the Sensex remains below 21483 and Nifty below 6415.

From a longer term perspective, Market has a strong support zone between Sensex 19466-19264 and Nifty 5767-5688. This is a confluence zone formed by the presence of Bullish Rising Gap between Sensex 19444-19293 and Nifty 5738-5688, intermediate low of Sensex 19264 and Nifty 5700 and the 50% Retracement level which is at Sensex 19466 and Nifty 5767. Thus this is a strong Support Zone and a breach of this support zone will end the current long term uptrend.

This week, both Sensex and Nifty remained way below the short term average of 20dma (Sensex – 20825 and Nifty – 6182) and medium term average of 50dma (Sensex – 20886 and Nifty – 6212). The market tested the long term average of 200dma (Sensex – 20023 and Nifty – 5977) thrice but never closed below it. Thus the trend in the short term and medium term timeframe has turned bearish, whereas the trend in the long term timeframe remains positive.

MACD and ROC both are negative and hence continue with its Sell signal. RSI (38) has gone down below the equilibrium line and hence suggests bearish momentum. MFI has just gone above the equilibrium line, suggesting money inflow. Stochastic Oscillator is under Buy mode as %K (25) remains above %D. ADX (26) has finally improved and now indicates that the current downtrend has strength. The Directional Indicators continue with its Sell signal as +DI remains below –DI. OBV continues in Sell mode forming lower top lower bottom formation. Bollinger Band has given a Bearish breakout on Monday when both the indices closed below their lower Band. Thus Oscillators suggests bearishness in the near term.

The Nifty O.I. PCR is at a level of 1.29. For the Feb series, highest Open interest build up is at 6000 Put and 6200 Call. This suggests that the market expects a small trading range with support coming in at 6000 levels and resistance around 6200 levels. Friday saw strong Put writing at the strike of 5900. Thus one can expect strong support at the level of 5900, if the level of 6000 gets taken out.

The Trendline Resistance for the Sensex is at 20698.

The Trendline Resistance for the Nifty is at 6152.

For the week ahead, Sensex will find Support at 20086-19785-19444 and will find Resistance at 20625-20899-21207.

For the week ahead, Nifty will find Support at 5972-5877-5786 and will find Resistance at 6170-6263-6358.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5786

5877

5972

6063

6170

6263

6358

Sensex

19444

19785

20086

20376

20625

20899

21207

LAST WEEKS RECOMMENDATIONS:

All the recommendations given in the previous week did well and reached their targets except for Hero Motors. But the Star performer of the week was Bajaj Auto which went up by around 6%. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Sell Grasim

2565

2477

2451

125

Rs.14,250

HeroMot

1969

1884

1939

125

Rs. 3,750

TataMot

349

335

332

1000

Rs.17,000

BajAuto

1901

1826

1793

125

Rs.13,500

Sell LiCHsg

196

186

187

2000

Rs.18,000

Total

Rs.66,500

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Cairn

334

329

343

353

Buy Dabur

174

172

178

183

Buy AsianPnt

490

481

505

521

Buy UltraTech

1729

1704

1772

1815

Buy L&TFin

74

72

78

82

WATCH OUT FOR:

Cairn

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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