Archives : NO NEGATIVE IS GOOD NEWS - 04/03/2016.

NO ‘NEGATIVE’ IS GOOD NEWS - 04/03/2016. 

RALLY GETS EXTENDED POST BUDGET.

As expected the market went into a short covering mode on completion of the Union Budget. Last week, it was mentioned that no negative news will be perceived as good news for the market; the market played on similar lines as there were no devils in the Budget. There was no structural change in Long Term Capital Gain Tax, and the Fiscal Discipline targets were adhered to. This pushed the market higher and the Bears had to run to cover their shorts. Thus Nifty tested and overcame Resistance zone of 7323-7363 and now is on course to test the strong Resistance zone of Nifty 7534-7600.


NO ‘NEGATIVE’ IS GOOD NEWS - 04/03/2016. 

RALLY GETS EXTENDED POST BUDGET.

As expected the market went into a short covering mode on completion of the Union Budget. Last week, it was mentioned that no negative news will be perceived as good news for the market; the market played on similar lines as there were no devils in the Budget. There was no structural change in Long Term Capital Gain Tax, and the Fiscal Discipline targets were adhered to. This pushed the market higher and the Bears had to run to cover their shorts. Thus Nifty tested and overcame Resistance zone of 7323-7363 and now is on course to test the strong Resistance zone of Nifty 7534-7600.

SHORT TERM TREND TURNS POSITIVE.

This week, both the indices recovered and managed a close above the short term average of 20dma (Sensex – 23609 and Nifty – 7174) and even the medium term average of 50dma (Sensex – 24407 and Nifty – 7420). But both Sensex and Nifty continue to remain well below the long term average of 200dma (Sensex – 26217 and Nifty – 7948). Thus, the trend in the short term and medium term timeframe has turned positive whereas the trend in the long term timeframe remains bearish.

SHORT COVERING RALLY LEVELS.

The indices are witnessing a Pull-Back rally, the genesis of which lies in short covering. For the Immediate short term, we are considering the fall from Sensex 26197 and Nifty 7972. The relevant Retracement levels for Short Term are placed at Sensex 23909-24346-24783 and Nifty 7264-7399-7534. In the Intermediate term, we consider the fall from Sensex 27618 and Nifty from 8336. The relevant Retracement levels for Medium Term are placed at Sensex 24452-25056-25661 and Nifty 7403-7581-7759.

7534-7600 – KEY RESISTANCE ZONE.

As the market has convincingly closed above hurdle of Nifty 7323-7363, the Pull-Back has now extended and it is now headed towards a very strong Resistance zone of Sensex 24783-25056 and Nifty 7534-7600. This Resistance zone is due to confluence of 61.8% of Short Term Retracement (Sensex 24783 and Nifty 7534), 50% of Intermediate Retracement (Sensex 25056 and Nifty 7581), Short Term Rally Top (Sensex 25002 and Nifty 7600) and Intermediate Bottoms (Sensex 24833 and Nifty 7539).

7308-7235 - BULLISH GAP.

While moving higher, both Sensex and Nifty left behind a Bullish Rising Gap between Sensex 24043-23821 and Nifty 7308-7235. This Gap will acts as strong Support going forward. Besides this Gap is also a Measuring Gap, the relevant Target as per Gap Theory falls at Sensex 25370 and Nifty 7718.

OSCILLATOR ANALYSIS.

MACD, despite being in the negative zone, continues with its Buy signal. Price ROC is positive and hence continues with its Buy signal. RSI (59) suggests Bullish Momentum. ADX has reduced to 31, suggesting that the Down-Trend is losing some strength. Directional Indicator +DI has cut –DI from below on Friday, giving a fresh Buy. MFI (56) suggests Positive Money Flow. OBV has started making higher Top, higher Bottom formation. Thus majority of Oscillators are suggesting a positive bias in the near term.

VOLATILITY CRUNCH AS EXPECTED.

Post Budget, Volatility Index India VIX dropped from 22 to around 17 levels. This event is called Volatility Crunch and it exactly played out as expected. Option traders who created short Vega strategies would have benefited immensely. Options data for February series indicates highest Put Open Interest build-up at the strike of 7000 and highest Call build-up at the strike of 7500. Thus Option data suggests a trading range with resistance coming in at 7500 and support at 7000.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7127

7252

7380

7485

7604

7721

7825

Sensex

23448

23855

24280

24646

25018

25372

25703

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Sell BajajAuto

2238

2152

2172

250

Rs.16,500

Sell PCJewel

324

309

296

2000

Rs.56,000

Sell IBuLHsg

576

554

560

800

Rs.12,800

Sell TVSMotor

264

253

256

2000

Rs.16,000

Sell Arvind

255

244

235

2000

Rs.40,000

Total

Rs.1,41,300.

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy BEML

1053

1025

1095

1139

Buy STFC

911

888

946

983

Buy BharatForge

818

797

851

885

Buy HIndZinc

173

169

179

186

Buy AllahbadBnk

50

48

54

59

WATCH OUT FOR:

Hind Zinc

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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