Archives : THE MAY CURSE PLAYING ON THE MARKET - 06/05/2016.

THE MAY ‘CURSE’ PLAYING ON THE MARKET - 06/05/2016.

Please note that there will not be any article dated 13/05/2016 and 20/05/2016. Next update will be directly on 27/05/2016.

SELL IN MAY & GO ON A VACATION.

Historically, the stock market associates the month of May with Bearishness. This time too, it is playing out in a similar fashion as the Bears have started taking command. The old adage “Sell in May & Go on a Vacation” holds particularly true, as the market seems ready to test lower levels going forward. The short term trend has turned negative this week, as now every rally is being sold into, with 20dma and 200dma providing strong Resistances. The Bulls have a flicker of hope as the market has taken support at the Bullish Gap between Sensex 25358-25180 and Nifty 7772-7717 and closed within it.


THE MAY ‘CURSE’ PLAYING ON THE MARKET - 06/05/2016.

Please note that there will not be any article dated 13/05/2016 and 20/05/2016. Next update will be directly on 27/05/2016.

SELL IN MAY & GO ON A VACATION.

Historically, the stock market associates the month of May with Bearishness. This time too, it is playing out in a similar fashion as the Bears have started taking command. The old adage “Sell in May & Go on a Vacation” holds particularly true, as the market seems ready to test lower levels going forward. The short term trend has turned negative this week, as now every rally is being sold into, with 20dma and 200dma providing strong Resistances. The Bulls have a flicker of hope as the market has taken support at the Bullish Gap between Sensex 25358-25180 and Nifty 7772-7717 and closed within it.

TECHNICALLY SPEAKING.

Sensex opened the week at 25565, made a high of 25705, low of 25057 and closed the week at 25228. Thus it closed the week with a loss of 378 points. At the same time the Nifty opened the week at 7822, made a high of 7890, low of 7678 and closed the week at 7733. Thus the Nifty closed the week with a loss of 116 points.

On the daily charts, Sensex has made a Doji whereas Nifty has managed a formation very close to Bullish Hammer, but in this case the candle has a small upper shadow. Interestingly Nifty has formed three neutral formations in past three days. This could have formed a Bullish Tri-Star formation if the second day candle body would have been lower than the first and third day’s body. On the weekly charts both the indices have formed a Black body candle which is smaller than average. Hence candlestick analysis suggests uncertainty in the near future.

Both the indices have started their Retracement from critical levels of Sensex 26100 and Nifty 7992. The failure of indices to overcome the Resistance zone has resulted in the ongoing Correction of the entire upward rally.  The relevant Retracement levels are placed at Sensex 24723-24297-23872 and Nifty 7546-7409-7271.

As expected the indices found Support at the Bullish Rising Gap between Sensex 25358-25180 and Nifty 7772-7717. Both Sensex and Nifty closed the week inside this Gap. A break on the lower side will lead the market to test the 50dma (Sensex – 24871 and Nifty – 7588) and 38.2% Retracement (Sensex – 24723 and Nifty – 7546) of the above mentioned fall.

MACD continues with its Sell signal. Price ROC has turned negative and is in Sell mode. RSI (48) indicates bearish momentum. Stochastic Oscillator %K is below %D; hence in Sell mode. ADX has dropped to 18 indicating that the current trend has no strength. Directional Indicators continue in Buy mode as +DI remains above –DI. The Buy signal in Bollinger Band has been negated this week as the indices closed below its mean of 20dma. MFI (43) suggests Negative Money Flow. Thus majority of Oscillators are suggesting a bearish bias in the near term.

This week, both the indices breached and closed below the short term average of 20dma (Sensex – 25432 and Nifty – 7790). Besides, both Sensex and Nifty remain above the medium term average of 50dma (Sensex – 24871 and Nifty – 7588) and below the long term average of 200dma (Sensex – 25784 and Nifty – 7833). Any Pull-back will face strong Resistance at 20dma and 200dma. Thus the trend in the short term timeframe has turned down. The trend in the long term timeframe remains down, whereas the trend in the medium term timeframe continues to remain up.

Options data for May series indicate highest Call Open Interest build-up has shifted to the strike of 8200 and highest Put build-up continues to remain at 7700. Thus Option data suggests a trading range with resistance coming in at 8200 and support at 7700.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7405

7516

7617

7733

7822

7908

7992

Sensex

24280

24523

24867

25228

25549

25810

26100

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

SKSMicro

603

625

635

1000

Rs.32,000

TechMah

486

503

486

1000

Rs. -

Buy OiL

332

341

340

1200

Rs. 9,600

PetronetLNG

263

273

283

3000

Rs.60,000

Buy NCC

78

82

82

8000

Rs.32,000

Total

Rs.1,33,600.

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy HDFC

1167

1144

1202

1239

Buy IGL

573

560

593

614

Buy GaiL

383

374

397

412

Buy IBReaL

76

73

81

87

Buy IDFC

46

44

50

55

WATCH OUT FOR :

IGL

Gail

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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