Archives : SHORT TERM TREND REVERSES - 27/06/2014.

SHORT TERM TREND REVERSES –  27/06/2014. 

HANGING ON TO THE SUPPORT ZONE.

It was the expiry week and the June series ended on a volatile note. Nifty plunged below 7500 on Thursday and Friday, but it held on to the support level mentioned in the previous week’s article which is between Nifty 7497-7477.  This Support zone is critical to the market and the much desired Price Correction will restart only if this zone gets taken out on closing basis. In that case, the minimum Correction levels are placed at Nifty 7409-7340. In the meanwhile, the Short term Trend has reversed and is now turned down.

 

 


SHORT TERM TREND REVERSES –  27/06/2014. 

HANGING ON TO THE SUPPORT ZONE.

It was the expiry week and the June series ended on a volatile note. Nifty plunged below 7500 on Thursday and Friday, but it held on to the support level mentioned in the previous week’s article which is between Nifty 7497-7477.  This Support zone is critical to the market and the much desired Price Correction will restart only if this zone gets taken out on closing basis. In that case, the minimum Correction levels are placed at Nifty 7409-7340. In the meanwhile, the Short term Trend has reversed and is now turned down.

TECHNICALLY SPEAKING.

Sensex opened the week at 25108, made a high of 25427, low of 24878 and closed the week at 25099. Thus it closed the week with a small loss of 6 points. At the same time the Nifty opened the week at 7514, made a high of 7593, low of 7441 and closed the week at 7508. Thus the Nifty closed the week with a minor loss of 3 points.

On Friday, both Sensex and Nifty formed a small black body candle forming a Homing Pigeon in the Sensex and a Harami Cross in the Nifty. Both the patterns have lesser relevance as they were formed in a sideways consolidation phase. On the weekly chart both the indices have formed a Doji formation which can still be a part of the Mat Hold pattern. Thus daily as well as weekly formations point towards consolidation with a bearish bias in the near term.

In the short term timeframe, we consider a Correction of the immediate rise from Sensex 24163 to 25735 and Nifty 7118 to 7700 and the corresponding Correction levels are placed at 25135-24949-24764 for the Sensex and 7477-7409-7340 for the Nifty.

Currently the market is experiencing Time wise Correction after reaching the daily as well as weekly Flag pattern target which was at 7705. But while moving higher the market has left behind two Bullish Rising Gaps out of which the first between Sensex 25129-25044 and Nifty 7497-7484 is already acting as a strong Support by supporting the market for the entire last week. In fact this gap aided by the 38.2% Retracement of the immediate Correction levels form a strong confluence Support zone between Sensex 25135-25044 and Nifty 7497-7477.

If the above mentioned Support zone gets breached, then one can expect the Correction to intensify; and the indices to move lower towards the next Support zone which is the second Bullish Rising Gap between Sensex 23729-23572 and Nifty 7067-7020. This is a stronger Support zone as it coincides with 61.8% Retracement level (i.e. Sensex 23598 and Nifty 7044) of the Sensex rise from 22277 and Nifty from 6638. Current intermediate rally will derail if this Rising Gap gets breached.

When the market overcame the previous top and made fresh lifetime highs, it marked the end of six year consolidation. On the weekly charts both Sensex and Nifty have completed a Bullish Saucer formation and the targets as per that will fall at Sensex 27081 and Nifty 8145 which are likely to be achieved within a period of next 20 months.

Both Sensex and Nifty have just closed below the short term average of 20dma (Sensex – 25217 and Nifty – 7539). But they are still above the medium term average of 50dma (Sensex – 24130 and Nifty – 7208) and the long term average of 200dma (Sensex – 21692 and Nifty – 6461). Thus the trend in the short term has turned bearish but that in the medium term and the long term timeframe continues to remain bullish.

MACD continues with its Sell signal despite being positive. RSI has reduced to 56 suggesting a reduction in bullish momentum. Besides it also exhibits negative divergence of the first order. Stochastic Oscillator continues in Sell mode as %K is below %D. MFI has reduced dramatically to 29, suggesting that there is negative money flow. OBV has started making lower top, lower bottom formation. The Directional Indicators continue in Buy mode as +DI is above –DI but they are converging. The Buy signal on Bollinger Band was negated this week when both the indices closed below the mean of Bollinger Band. ADX has dropped slightly and is now at a level of 45 which suggests that the strength of the current uptrend is very high but the trend has now matured. Hence Oscillator analysis suggests remaining cautious as some correction in the current uptrend can be expected. 

The Rollover in Nifty was above 71% which is much greater than the three months average of 59%. As a result of high rollovers in Nifty, overall market wide rollovers were also high at 84% as compared to the 3 months average of 80%.  Power, Infrastructure and Cement sectors witnessed high rollovers. Stocks like JSW Steel, Karnataka Bank, Union Bank, McLeod Russel, Bata and Biocon have witnessed strong rollovers.

One thing is certain that the Volatility Index will now witness a sharp surge in the coming two weeks and we will witness India VIX giving a breakout by closing above 22, possibly paving the way towards 28. Highest Call writing is seen at the strike of 8000 and highest Put writing is at the strike of 7000. Thus the market is expecting a very big range between 7000 and 8000. Friday saw strong buildup at 7600 Call and 7300 Put suggesting a short term trading range between 7600 and 7300.

For the week ahead, Sensex will find Support at 24828-24422-24163 and will find Resistance at 25427-25735-26124.

For the week ahead, Nifty will find Support at 7399-7269-7172 and will find Resistance at 7593-7700-7838.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7172

7269

7399

7508

7593

7700

7838

Sensex

24163

24422

24828

25099

25427

25735

26124

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

ReLInfra

726

698

698

500

Rs.14,000

Sell PNB

951

914

938

250

Rs. 3,250

CanBnk

422

404

418

1000

Rs. 4,000

AdaniEnt

449

430

431

1000

Rs.18,000

Sell JPAss

71

67

69

4000

Rs. 8,000

Total

Rs.47,250

THIS WEEKS RECOMMENDATIONS:

This week the market is expected to be very volatile and hence Pair Strategies are suggested to be done on a rupee neutral basis. 

PAIR NO.

STOCK

CMP

SL

TGT - 1

TGT -2

1

Buy

TechMah

2125

2093

2174

2225

Sell

ICICI

1384

1404

1350

1315

2

Buy

Buy Titan

353

347

363

374

Sell

CoalInd

380

388

367

353

3

Buy

KPIT

169

165

175

182

Sell

Idea

130

133

125

119

WATCH OUT FOR:

Idea

Coal Ind

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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