Archives : VOLATILITY HITS THE MARKET - 06/02/2015.

VOLATILITY HITS THE MARKET - 06/02/2015.

FURTHER DECLINE - A BUYING OPPORTUNITY.

After forming a Key Reversal Bar on last Friday, the market went down every day of the week. Sensex has crashed by 1200 points from the top in just six days, which clearly highlights the severity of the fall. It did not come as a surprise as it was clearly highlighted in the previous week’s article that Bull market Corrections will be sharp and severe; and one should not take that as a reversal of the trend. As a matter of fact further declines from current levels will provide good buying opportunity especially since Budget is round the corner.

 

 


VOLATILITY HITS THE MARKET - 06/02/2015.

FURTHER DECLINE - A BUYING OPPORTUNITY.

After forming a Key Reversal Bar on last Friday, the market went down every day of the week. Sensex has crashed by 1200 points from the top in just six days, which clearly highlights the severity of the fall. It did not come as a surprise as it was clearly highlighted in the previous week’s article that Bull market Corrections will be sharp and severe; and one should not take that as a reversal of the trend. As a matter of fact further declines from current levels will provide good buying opportunity especially since Budget is round the corner.

TECHNICALLY SPEAKING.

Sensex opened the week at 29143, made a high of 29277, low of 28647 and closed the week at 28717. Thus it closed the week with a loss of 465 points. At the same time the Nifty opened the week at 8802, made a high of 8840, low of 8645 and closed the week at 8661. Thus the Nifty closed the week with a loss of 147 points.

On the daily charts, both Sensex and Nifty have formed a black body candle which is sixth black candle in a row. On the weekly charts, both the indices have formed a big black body candle. Thus daily as well as weekly candlestick patterns point towards bearishness in the near term.

On the monthly chart, both the indices have formed a Last Engulfing Top which is a bearish pattern. It requires a confirmation in the form of a black body candle in the next month. But if the February month candle closes above the high of this pattern i.e. above Sensex 29844 and Nifty 8996 then the above pattern will stand negated.

Both the indices are correcting their recent rise i.e. from 26469 to 29844 for the Sensex and 7961 to 8996 for the Nifty. The relevant Correction levels are placed at 28555-28156-27758 for the Sensex and 8601-8478-8356 for the Nifty.

The weekly Upward Gap between Sensex 28197-28194 and Nifty 8531-8530 which is not only a Measuring Gap but will now also act as strong support. Hence one can expect a strong support between Sensex 28197-28194 and Nifty 8531-8530. Also the target as per Gap hypothesis comes at Sensex 29922 and Nifty 9100, provided both the indices continue to stay above this weekly gap.

MACD and Price ROC have given fresh Sell signals this week. RSI (53) has lowered but is still above the equilibrium line; same is the story with MFI (63). Stochastic Oscillator %K (45) is below %D and hence continues in Sell mode. ADX continues at a higher level of 31, suggesting that the uptrend is still strong. Directional Indicators continue in Buy mode as +DI remains above –DI. OBV and Bollinger Band still continue in Buy mode. Thus Oscillators are painting a mixed picture as certain momentum oscillators have turned bearish. 

Both the indices successfully tested the short term average of 20dma (Sensex – 28640 and Nifty – 8650) on Friday without breaching it. Both the indices continue to remain above the medium term average of 50dma (Sensex – 28055 and Nifty – 8448) and also the long term average of 200dma (Sensex – 26308 and Nifty – 7877). Thus the trend in the short term, medium term and long term timeframe continue to remain bullish.

The Volatility Index, India VIX continues to gain and has now closed close to 21, with a potential target of 28. Option data suggest highest Put Open Interest is at 8500, whereas the highest Call build-up continues at the strike of 9000. Thus Option data suggests a wide trading range with support coming in at 8500 and resistance around 9000. Friday saw strong build-up for 8600 Put which indicates that the level of 8600 might act as immediate support.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8326

8445

8530

8661

8774

8893

8996

Sensex

27703

28064

28370

28717

29165

29554

29844

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy Bhel

291

302

300

1000

Rs. 9,000

Buy IOC

347

360

348

1000

Rs. 1,000

ApolloTyres

242

255

250

1000

Rs. 8,000

JindalStL

158

165

160

2000

Rs. 4,000

Buy NTPC

143

148

145

2000

Rs. 4,000

Total

Rs.26,000.

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

TCS

2575

2544

2626

2679

Sell

Dr.Reddy

3044

3119

2928

2811

2

Buy

JubilantFood

1475

1437

1534

1595

Sell

StridesArc

866

885

835

803

3

Buy

ITC

373

369

380

388

Sell

Havells

244

250

234

223

WATCH OUT FOR:

Dr Reddy

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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