Archives : RELIEF RALLY GETS EXTENDED - 29/01/2016.

RELIEF RALLY GETS EXTENDED - 29/01/2016.

REVERSION TO THE MEAN.

This week our markets rallied on the back of positive global markets, and as a result the relief rally got extended. According to Mean Reversion principle, the market had to revert back to the Mean sooner or later and that is what the market has done this week by reclaiming the short term average. Thus the short term trend has turned positive and now the market seems to be on its way to test the strong Resistance zone between Nifty 7674-7721. It should be kept in mind that the current rally is just a relief rally and one should not be surprised if the rally gets sold into.


RELIEF RALLY GETS EXTENDED - 29/01/2016.

REVERSION TO THE MEAN.

This week our markets rallied on the back of positive global markets, and as a result the relief rally got extended. According to Mean Reversion principle, the market had to revert back to the Mean sooner or later and that is what the market has done this week by reclaiming the short term average. Thus the short term trend has turned positive and now the market seems to be on its way to test the strong Resistance zone between Nifty 7674-7721. It should be kept in mind that the current rally is just a relief rally and one should not be surprised if the rally gets sold into.

TECHNICALLY SPEAKING.

Sensex opened the week at 24540, made a high of 24911, low of 24340 and closed the week at 24870. Thus it closed the week with a gain of 435 points. At the same time the Nifty opened the week at 7468, made a high of 7575, low of 7402 and closed the week at 7563. Thus the Nifty closed the week with a gain of 141 points.

On the daily charts, both the indices have formed a big Opening White body Marubuzo which is a bullish pattern. On the weekly charts both the indices have formed a Morning Doji Star formation which is also a bullish reversal pattern. Thus both daily and weekly candlestick study indicates bullish bias in the near term.

The big Opening white body Marubuzo completed a Bullish Flag on the daily charts. The target as per this pattern falls at Sensex 25461 and 7733 for the Nifty. These targets will be achieved as long as Sensex remains above 24340 & Nifty above 7402.

The ongoing upward rally is a Relief rally and it is correcting the recent fall from 26197 to 23839 for the Sensex and 7972 to 7241 for the Nifty. The relevant Retracement levels are 24740-25018-25297 for the Sensex and 7520-7607-7693 for the Nifty.

The Bearish Gap between 25230-25357 for the Sensex and 7674-7721 for the Nifty will act as a strong Resistance going forward as it also includes the 61.8% Retracement level (Sensex – 25297 and Nifty – 7693) and the 50dma (Sensex – 25342 and Nifty – 7704). Thus the current Pull-Back rally will face stiff test at this critical Resistance zone.

In the higher timeframe, both the indices are retracing the strong long term upward rally which started from Sensex 17448 and Nifty 5118. The relevant Correction levels are placed at Sensex 25220-23736-22252 and Nifty 7591-7119-6646.

Despite the current Relief rally, both the indices remain on course to achieve the recent Bearish Head and Shoulders pattern target which is at Sensex 23276 and Nifty 7092. Also the higher degree Head and Shoulders still holds good, the target for which falls at Sensex 22552 and Nifty 6741.

MACD and Price ROC have signalled a fresh Buy. RSI has just turned 50, suggesting a shift towards bullish momentum. OBV continues to make lower top lower bottom formation and hence in Sell mode. MFI (32) indicates negative money flow in the market. ADX is at a high level of 41; indicates that the downtrend is now maturing and a minor consolidation can be expected. The Directional Indicators continue in Sell mode as +DI remains below –DI. Thus certain Momentum Oscillators are suggesting a bullish bias in the near term.

This week, both the indices tested and closed above the short term average of 20dma (Sensex – 24779 and Nifty – 7535). However, both Sensex and Nifty continue to remain below the medium term average of 50dma (Sensex – 25342 and Nifty – 7704) and even the long term average of 200dma (Sensex – 26695 and Nifty – 8088). Thus the trend in the short term timeframe has turned bullish, whereas the trend in the medium term and long term timeframe continues to remain bearish.

Options data for February series indicates highest Put Open Interest build-up at the strike of 7400 and highest Call build-up at the strike of 7600. Thus Option data suggests a narrow trading range with resistance coming in at 7600 and support at 7400.

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Britannia

2616

2521

2588

200

Rs. 5,600

Sell Grasim

3447

3344

3321

150

Rs.18,900

CoLPaL

882

852

846

500

Rs.18,000

Sell HUL

772

746

766

600

Rs. 3,600

Sell CastroL

418

402

414

1100

Rs. 4,400

Total

Rs.50,500.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7241

7336

7426

7563

7667

7771

7853

Sensex

23839

24141

24435

24870

25230

25656

25948

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Infosys

1164

1138

1203

1243

Buy SKS Micro

529

515

550

573

Buy SupremeInd

740

715

778

818

Buy PowerGrid

147

144

152

157

Buy MuthootFin

192

187

200

209

WATCH OUT FOR:

Infosys Penant

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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