Archives : SHORT TERM TREND REVERSES - 12/12/2014.

SHORT TERM TREND REVERSES - 12/12/2014. 

MUCH AWAITED ‘CORRECTION’ BEGINS.

As expected and mentioned in the previous weeks article, the market started to correct once the level of Nifty 8429 was taken out. Also interestingly it has just stopped shy of our Support zone between 8198-8175. Those who had taken our advice to hedge their positions were saved; hence we once again emphasize on using hedging strategies to take positions in the market. The market had moved up almost vertically and hence some consolidation was required. Thus this Correction is not only a necessity currently, but it will be healthy for the overall well-being of the market. Strong trendline support is seen at the level of Nifty 8100, which if breached then we will need to check for the Correction levels of a higher degree.

 


SHORT TERM TREND REVERSES - 12/12/2014. 

MUCH AWAITED ‘CORRECTION’ BEGINS.

As expected and mentioned in the previous weeks article, the market started to correct once the level of Nifty 8429 was taken out. Also interestingly it has just stopped shy of our Support zone between 8198-8175. Those who had taken our advice to hedge their positions were saved; hence we once again emphasize on using hedging strategies to take positions in the market. The market had moved up almost vertically and hence some consolidation was required. Thus this Correction is not only a necessity currently, but it will be healthy for the overall well-being of the market. Strong trendline support is seen at the level of Nifty 8100, which if breached then we will need to check for the Correction levels of a higher degree.

TECHNICALLY SPEAKING.

Sensex opened the week at 28433, made a high of 28494, low of 27320 and closed the week at 27350. Thus it closed the week with a big loss of 1108 points. At the same time the Nifty opened the week at 8538, made a high of 8546, low of 8216 and closed the week at 8224. Thus the Nifty closed the week with a loss of 314 points.

On the daily charts, both the indices have formed a big black body candle whereas on the weekly chart both the indices have formed a big black body candle almost like a Closing Marubuzo.  Both the daily as well as the weekly chart have formation of a Tweezer Top which is a bearish reversal pattern. It will get negated only when Sensex closes above 28822 and Nifty above 8626. On the daily charts, the Tweezer top was followed by Three Black Crows formation. Thus daily as well as weekly charts suggest bearishness to continue in the near term.

Nifty 8100 is a critical level, not only it is a strong Trendline support level, but also a Bearish Rising Wedge pattern completion level. We will check the targets only when it gets taken out. Till then the Nifty is likely to test the Support zone between 8198-8175 followed by the above mentioned Trendline support levels which are at Sensex 27180 and Nifty 8100. Correction levels as per Fibonacci Retracement theory remains 27710-27366-27023 for the Sensex and 8281-8175-8068 for the Nifty.

MACD and Price ROC both continue with their Sell signals. RSI has dropped below the centerline suggesting bearish momentum. Stochastic Oscillator too continues in Sell mode as %K is below %D. Also the MFI has fallen below the equilibrium line to 37 which suggest money flowing out. ADX has fallen to 29, which indicates that the uptrend has lost some of its strength. Direction Indicators too are in Sell mode as +DI has gone below –DI. Bollinger Band has given a Sell signal on Thursday when price closed below the lower Band. Majority of the Oscillators have turned bearish while MACD and RSI are exhibiting negative divergence.

Both the indices continue have closed below the short term average of 20dma (Sensex – 28215 and Nifty – 8452) but Nifty has managed to stay just above the medium term average of 50dma whereas the Sensex has closed below it 50dma (Sensex – 27469 and Nifty – 8216). But both Sensex and Nifty continue to remain well above the long term average of 200dma (Sensex – 25101 and Nifty – 7500). Thus the trend in the short term timeframe has turned bearish whereas trend in the long term timeframe continues to remain up.

Even though India VIX remains low at 13.75, it has seen a jump of 15% for the past week which indicates increase in Volatility. One can expect the Volatility index to continue to increase for the coming week as well. Option data suggest highest Put Open Interest has shifted to 8100 whereas the highest Call build-up has shifted to the strike of 8500. Thus Option data suggests a trading range with support coming in at 8100 and resistance around 8500.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7856

7974

8090

8224

8320

8429

8534

Sensex

26248

26615

26994

27350

27739

28126

28541

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

 HindZinc

174

180

176

2000

Rs. 4,000

Buy ITC

391

403

400

1000

Rs. 9,000

GodrejCP

1001

1035

1029

250

Rs. 7,000

Buy KtkBk

151

157

154

2000

Rs. 6,000

Kalpatru

186

203

209

2000

Rs.46,000

Total

Rs.72,000.

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell BajajAuto

2521

2570

2441

2360

Sell ABNuvo

1662

1706

1597

1530

Sell CESC

656

676

624

591

Sell IRB

245

253

233

221

Sell Crompton

172

179

161

150

WATCH OUT FOR:

ABNuvo

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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