Archives : BETWEEN BEARISH GAP & 200DMA - 14/02/2014.

BETWEEN BEARISH GAP & 200DMA –  14/02/2014.

BACK TO TEST THE 200DMA.

As mentioned in the last week’s article, the market found strong resistance at the Resistance zone (Sensex 20544 – 20613 and Nifty 6097-6117) formed due to the confluence of first Bearish gap and the 38.2% Retracement of the recent fall. As a result the market went back to test the support at 200dma and found support once again. As a result the market seems to have shifted to a lower trading range between the 200dma on the lower side and the Resistance zone on the higher side.

 

 


BETWEEN BEARISH GAP & 200DMA –  14/02/2014.

BACK TO TEST THE 200DMA.

As mentioned in the last week’s article, the market found strong resistance at the Resistance zone (Sensex 20544 – 20613 and Nifty 6097-6117) formed due to the confluence of first Bearish gap and the 38.2% Retracement of the recent fall. As a result the market went back to test the support at 200dma and found support once again. As a result the market seems to have shifted to a lower trading range between the 200dma on the lower side and the Resistance zone on the higher side.

TECHNICALLY SPEAKING.

Sensex opened the week at 20429, made a high of 20516, low of 20149 and closed the week at 20366. Thus it registered a weekly loss of 10 points. At the same time the Nifty opened the week at 6072, made a high of 6106, low of 5984 and closed the week at 6048. Thus the Nifty closed the week with a loss of 15 points.

On the daily charts, both Sensex and Nifty have formed a Bullish Harami pattern but here it has formed in sideways formation. On the weekly charts both the indices have formed a small black body Spinning Top which is a neutral formation. This formation comes after a Hammer formation last week, hence there was no confirmation for the Hammer. Thus the candlestick patterns, this week seems indecisive.

This week, the market could not breach the strong Resistance zone (Sensex 20544 – 20613 and Nifty 6097-6117) formed due to the confluence of first Bearish Gap (Sensex 20572 - 20613 and Nifty 6097 – 6109) and the 38.2% Retracement (Sensex – 20544 and Nifty – 6117) of the recent fall. Hence for the upward move to continue it becomes imperative for the market to close above this Resistance zone.

The current downward rally has seen formation of two Bearish Gaps on the daily charts. The first Bearish Gap between Sensex 20572-20613 & Nifty 6097-6109 acted as a strong resistance this week. 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. Last time 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 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 below the short term average of 20dma (Sensex – 20621 and Nifty – 6124) and medium term average of 50dma (Sensex – 20836 and Nifty – 6197). This week the market once again tested the long term average of 200dma (Sensex – 20045 and Nifty – 5981) and managed successfully to close well above it. Thus the trend in the short term and medium term timeframe remains 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 (41) continues to stay below the equilibrium line and hence suggests bearish momentum. MFI (61) is above the equilibrium line, suggesting money inflow. Stochastic Oscillator is under Buy mode as %K (37) remains above %D. ADX (29) is increasing and now indicates that the current downtrend has strength. The Directional Indicators continue with its Sell signal as +DI remains below –DI. Even though OBV has moved higher it is yet to signal a Buy. Bollinger Band continues in Sell mode. Thus Oscillators suggests bearishness in the near term.

The Nifty O.I. PCR is at a level of 1.24. 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.

The Trendline Resistance for the Sensex is at 20716.

The Trendline Resistance for the Nifty is at 6154.

For the week ahead, Sensex will find Support at 20086-19785-19444 and will find Resistance at 20613-20899-21207.

For the week ahead, Nifty will find Support at 5957-5877-5786 and will find Resistance at 6139-6243-6358.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5786

5877

5957

6048

6139

6243

6358

Sensex

19444

19785

20086

20366

20613

20899

21207

LAST WEEKS RECOMMENDATIONS:

STOCK

Recom @

Target

Reached

Buy Cairn

334

343

337

Buy Dabur

174

178

178

Buy AsianPnt

490

505

495

Buy UltraTech

1729

1772

1750

Buy L&TFin

74

78

75

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell OFSS

3085

3124

3028

2970

Sell HDFC

771

785

747

723

Sell Ambuja

151

154

146

141

Sell Cipla

373

381

361

348

Sell BoI

174

177

169

163

WATCH OUT FOR:

Ambuja

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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