DOES THIS UP MOVE REVERSE THE TREND?
The market continued its bullishness as the both the indices managed to overcome the first bearish gap and also close above that. But the key question remains still remains – has the long term trend reversed? The answer still remains ‘No’, even though the market is now gaining strength and is also challenging various Resistances. The set up is such that a further dose of bullishness will push the market into a very strong Resistance between 8322-8380 which will also decide the fate of the long term Trend.
Sensex opened the week at 27242, made a high of 27305, low of 26713 and closed the week at 27214. Thus it closed the week with a gain of 135 points. At the same time the Nifty opened the week at 8231, made a high of 8246, low of 8088 and closed the week at 8238. Thus the Nifty closed the week with a gain of 49 points.
On the weekly charts both the indices have formed a Dragon-fly Doji; the only hitch is a small upper shadow. A bearish candle in the next week will confirm a reversal. On the daily charts both Sensex and Nifty have formed a real white body candle in line with the upward movement. Thus the weekly candlestick pattern is suggesting a doubt regarding continuation of further upward movement.
Both the indices are undergoing a Retracement of the entire fall from 30024 to 24833 for the Sensex and 9119 to 7539 for the Nifty. The relevant Retracement levels are placed at Sensex 26816-27429-28041 and 8143-8329-8515 for the Nifty.
A further upward push by the Bulls will move the market towards the higher Bearish Gap between 27442 – 27564 for the Sensex and 8322 – 8359 for the Nifty. Accompanying this gap is the 50% Retracement (Sensex - 27429 and Nifty - 8329), the critical 200dma (Sensex – 27674 and Nifty - 8380) and strong Trendline Resistance (Sensex 27670 and Nifty 8368) which is just above the gap. Thus all the above resistances combine to form a strong Resistance zone between Sensex 27429-27674 and Nifty 8322-8380.
Despite the current pull-back, both the indices remain on track to achieve the targets for Head and Shoulders pattern (Sensex 24486 and Nifty 7425). Besides a higher degree Head and Shoulders got completed recently, the target for that falls at Sensex 22552 and Nifty 6741.
MACD and Price ROC are both positive and continue in Buy mode. RSI (61) continues to suggest bullish momentum. Stochastic Oscillator (87) is in overbought zone but has signalled a Buy. ADX has dropped to 19, suggesting that the current downtrend has lost all of its strength. However the Directional Indicators gave a positive crossover on Thursday. MFI (59) continues to suggest positive money flow. OBV continues in Buy mode while making higher top higher bottom formation. Also the Bollinger Band continues with its Buy signalled last week. Thus Oscillators are showing a bullish bias in the near term.
This week, both the indices managed to remain and close above the short term average of 20dma (Sensex – 26446 and Nifty – 8024) and also the medium term average of 50dma (Sensex – 26572 and Nifty – 8086). However, both Sensex and Nifty continue to remain below the long term average of 200dma (Sensex – 27674 and Nifty – 8380). Thus the trend in the short term and medium term has turned up whereas that in the long term timeframe continues to remain bearish.
Options data for October series indicates highest Put Open Interest build-up at the strike of 8000 and highest Call build-up at the strike of 8300. Thus Option data suggests a trading range with resistance coming in at 8300 and support at 8000.
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