Archives : DESPITE THE PULL-BACK; TREND REMAINS BEARISH - 18/12/2015.

DESPITE THE PULL-BACK; TREND REMAINS BEARISH - 18/12/2015.

BEARISH GAP HALTS THE PULL-BACK.

After opening with a gap down on Monday, the Nifty took support at the critical support of 7539 and started a Pull-Back rally. The Pull-Back rally stretched for four days but it was halted at the Bearish Falling Gap between 7821-7853. As a result the Short term Trend still remains bearish, which can turn positive if the Nifty overcomes this Bearish Gap. Such Pull-Back rallies are common in a bear market, so one should use such rallies as an exit opportunity.


DESPITE THE PULL-BACK; TREND REMAINS BEARISH - 18/12/2015.

BEARISH GAP HALTS THE PULL-BACK.

After opening with a gap down on Monday, the Nifty took support at the critical support of 7539 and started a Pull-Back rally. The Pull-Back rally stretched for four days but it was halted at the Bearish Falling Gap between 7821-7853. As a result the Short term Trend still remains bearish, which can turn positive if the Nifty overcomes this Bearish Gap. Such Pull-Back rallies are common in a bear market, so one should use such rallies as an exit opportunity.

TECHNICALLY SPEAKING.

Sensex opened the week at 24935, made a high of 25831, low of 24867 and closed the week at 25519. Thus it closed the week with a gain of 475 points. At the same time the Nifty opened the week at 7558, made a high of 7852, low of 7551 and closed the week at 7761. Thus the Nifty closed the week with a gain of 151 points.

On the weekly charts, both the indices have formed a Piercing Line pattern which is a bullish reversal pattern. This pattern will remain in force till Sensex remains above 24867 and Nifty above 7551. On the daily charts, both Sensex and Nifty have formed a real black body candle after forming four white body candles. Thus weekly candlestick pattern suggests a bullish bias.

After taking support at Sensex 24867 and Nifty 7551, the indices bounced back and are in a pull-back mode. The relevant Pull-Back levels are placed at Sensex 25918-26243-26567 and Nifty 7851-7944-8036.

The Pull-Back rally stopped exactly at the Bearish Falling Gap between Sensex 25810-25857 and Nifty 7821-7853. This Gap is acting as a strong Resistance and until this gap is crossed; the Pull-back rally will be unable to continue.

On the higher side, there lies a very strong Resistance zone between Sensex 26243-26258 and Nifty 7944-7979 which is a result of confluence of 50% Retracement (Sensex 26243 and Nifty 7944), Intermediate Rally Top (Sensex 26256 and Nifty 7979) and 50dma (Sensex 26258 and Nifty 7954).

The Bearish Head and Shoulders formed last week will remain intact and head towards target of Sensex 23276 and Nifty 7092, as long as Sensex remains below 26256 and Nifty below 7979. Besides this formation, both the indices remain on track to achieve the targets for Head and Shoulders pattern (Sensex 24486 and Nifty 7425) and also a higher degree Head and Shoulders, the target for which falls at Sensex 22552 and Nifty 6741.

Applying Fibonacci Retracement analysis on both the indices, gives two strong confluence zones which can be termed as Target Zone 1 and Target Zone 2. Target Zone 1 is from Sensex 22914-22580 and Nifty 6860-6803 whereas Target Zone 2 for the Sensex falls at 21108-20823 and Nifty 6338-6284.

MACD continues in Buy mode whereas Price ROC is negative and continues in Sell mode. RSI (46) suggests bearish momentum. Stochastic Oscillator %K (54) continues above %D, hence in Buy mode. OBV continues to make lower top lower bottom formation and hence in Sell mode. MFI (34) indicates negative money flow in the market. Sell signal on Bollinger Band got negated this Thursday when price closed above the mean of Bollinger Band. ADX at 31; indicates that the downtrend is still strong. The Directional Indicators continue in Sell mode as +DI remains below –DI. Thus Oscillators are presenting a mixed picture with a slight bearish bias.

This week, both the indices tested the short term average of 20dma (Sensex – 25649 and Nifty – 7795) but could not close above it. However, both Sensex and Nifty remains below the medium term average of 50dma (Sensex – 26258 and Nifty – 7954) and the long term average of 200dma (Sensex – 27186 and Nifty – 8234). Thus the trend in the short term, medium term and long term timeframe continues to remain bearish.

Options data for December series indicates highest Call Open Interest build-up at the strike of 8000 and highest Put build-up at the strike of 7500. Thus Option data suggests a trading range with resistance coming in at 8000 and support at 7500.

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Sell Maruti

4480

4359

4471

125

Rs. 1,125

Sell Lupin

1740

1675

1722

300

Rs. 5,400

Pidilite

527

505

520

500

Rs. 3,500

Sell STFC

808

775

780

500

Rs.14,000

Castrol

416

398

415

1000

Rs. 1,000

Total

Rs.25,025.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7422

7539

7654

7761

7853

7979

8060

Sensex

24422

24833

25175

25519

25857

26256

26687

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell DrReddy

2974

3043

2870

2763

Sell UltraTech

2815

2879

2718

2619

Sell ACC

1349

1373

1312

1274

Sell Strides

1306

1336

1260

1213

Sell Wipro

554

564

539

523

WATCH OUT FOR:

Wipro

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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