Archives : IN DISTRIBUTION MODE - 11/03/2016.

IN DISTRUBUTION MODE - 11/03/2016. 

NEARING THE TOP END OF TRADING RANGE.

Bear market Corrections are supposed to be sharp and swift, which is the case currently. Many times, these Corrections are so fast that they give the impression that the trend has reversed, but the reality is that these Pull-Backs are solely based on Short Covering and once it is out of the way, the Down Trend resumes. After rallying for more than 650 points on the Nifty in past two weeks, Nifty is now consolidating in a short term trading range of 7400 to 7600. Interestingly this consolidation clearly shows signs of distribution, thereby preparing for the next leg of downtrend.


IN DISTRUBUTION MODE - 11/03/2016. 

NEARING THE TOP END OF TRADING RANGE.

Bear market Corrections are supposed to be sharp and swift, which is the case currently. Many times, these Corrections are so fast that they give the impression that the trend has reversed, but the reality is that these Pull-Backs are solely based on Short Covering and once it is out of the way, the Down Trend resumes. After rallying for more than 650 points on the Nifty in past two weeks, Nifty is now consolidating in a short term trading range of 7400 to 7600. Interestingly this consolidation clearly shows signs of distribution, thereby preparing for the next leg of downtrend.

TECHNICALLY SPEAKING.

Sensex opened the week at 24655, made a high of 24820, low of 24451 and closed the week at 24717. Thus it closed the week with a gain of 71 points. At the same time the Nifty opened the week at 7486, made a high of 7547, low of 7424 and closed the week at 7510. Thus the Nifty closed the week with a gain of 25 points.

On the daily charts, both the indices have formed a small white body candle which is inside the previous days black body candle. The candle construction is like Bullish Harami, but cannot be classified as one; as it found in a downtrend which is not the case here. On the weekly charts, both the indices have formed a small white body candle which is similar to a Star formation. Thus both daily as well as weekly candlestick pattern do not indicate a clear bias.

For the short term, both the indices are witnessing a Pull-Back rally of 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.

The Pull-Back has now extended and it is now testing 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).

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.

MACD and Price ROC both are positive and continue with their Buy signals. RSI (59) suggests Bullish Momentum. ADX has dropped further to 23, suggesting that the Down-Trend has lost majority of its strength. Directional Indicators indicate continuation of Buy signal as +DI remains above –DI. MFI (67) suggests Positive Money Flow. OBV continues to make higher Top, higher Bottom formation. Thus majority of Oscillators are suggesting a positive bias in the near term.

This week, both the indices managed to stay and close above the short term average of 20dma (Sensex – 23798 and Nifty – 7230) and even the medium term average of 50dma (Sensex – 24304 and Nifty – 7388). But both Sensex and Nifty continue to remain well below the long term average of 200dma (Sensex – 26154 and Nifty – 7930). Thus, the trend in the short term and medium term timeframe is positive whereas the trend in the long term timeframe remains bearish.

Options data for March indicates highest Put Open Interest build-up has shifted higher at the strike of 7200 and highest Call build-up at the strike of 7500, but Friday saw strong addition in Call Open Interest at the strike of 7700. Thus Option data suggests a trading range with resistance coming in at 7500 and 7700, with support at 7200.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7204

7308

7406

7510

7600

7715

7812

Sensex

23692

24043

24383

24717

25002

25357

25703

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy BEML

1053

1095

1072

500

Rs. 9,500

Buy STFC

911

946

943

500

Rs.16,000

Buy BhrtFrg

818

851

847

500

Rs.14,500

HindZinc

173

179

178

3200

Rs.16,000

AllahbdBnk

50

54

52

6000

Rs.12,000

Total

Rs.68,000.

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Welspun Ind

973

946

1014

1057

Buy Bata Ind

493

480

513

534

Buy Havells Ind

290

283

301

313

Buy KSCL

393

383

409

426

Buy Granules Ind

126

123

131

137

WATCH OUT FOR:

Bata

Havells

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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