Archives : BREAKOUT - INDECISIVE - 23/09/2016.

BREAKOUT - INDECISIVE - 23/09/2016.

PRICE DISCOUNTS EVERYTHING.

The first Principle of the Classical Theory ‘Price Discounts Everything’ was at play in the week gone by. The FED announcement to keep interest rates unchanged was already discounted in the price. The formation of Bearish Doji confirmed the above Principle. No doubt the narrow trading range was broken after a big gap up opening but the bullish momentum could not sustain as it resulted in profit booking. Only a close above Sensex 28462 and Nifty 8893 will pave the way for further upward movement.


BREAKOUT - INDECISIVE - 23/09/2016.

PRICE DISCOUNTS EVERYTHING.

The first Principle of the Classical Theory ‘Price Discounts Everything’ was at play in the week gone by. The FED announcement to keep interest rates unchanged was already discounted in the price. The formation of Bearish Doji confirmed the above Principle. No doubt the narrow trading range was broken after a big gap up opening but the bullish momentum could not sustain as it resulted in profit booking. Only a close above Sensex 28462 and Nifty 8893 will pave the way for further upward movement.

TECHNICALLY SPEAKING.

Sensex opened the week at 28626, made a high of 28871, low of 28462 and closed the week at 28668. Thus it closed the week with a gain of 69 points. At the same time the Nifty opened the week at 8788, made a high of 8893, low of 8757 and closed the week at 8831. Thus the Nifty closed the week with a gain of 52 points.

On the daily charts, both Sensex and Nifty formed a Bearish Doji on Thursday after a big gap up opening. Friday saw a black body candle formation but that cannot be taken as confirmation because of the smaller candle body. On the weekly charts, both the indices have formed a small white body Spinning Top. This is the third neutral formation in three successive weeks. Thus daily as well as weekly charts are indecisive.

Thursday saw a big gap up opening in both the indices which helped in breaking the narrow trading range on the upside. But the formation of a Doji meant that the breakout was not convincing and hence the indices again settled in the range. Only a close above the bearish Doji i.e. Sensex 28871 and Nifty 8893 will pave the way towards testing of life time highs.

On the downside, immediate Support exists in the form of short term Trendline which falls at Sensex – 28454 and Nifty – 8796. It is a critical Trendline from which the indices have successfully taken support almost three times.

Both the indices continue to trade within the boundaries created by the Gaps on both sides. On the upper side, Bearish Gap between Sensex 28631-28755 and Nifty 8848-8858 was filled this week but the formation was a Bearish Doji. Hence a close above that will be required for moving further up. On the lower side, Bullish Gap between Sensex 28010-27952 and Nifty 8642-8622 continues to act as strong support. If this downside Bullish Gap is breached, then the indices are likely to test the critical Support in the form of another Bullish Gap between Sensex 27667-27647 and Nifty 8479-8475.

MACD is in Sell mode but in positive territory whereas Price ROC is negative and continues in Sell mode. RSI (57) suggests bullish momentum. Stochastic Oscillator %K (48) has just gone above %D giving a fresh Buy signal. ADX has reduced to 19 which suggest that there is no clear trend. Directional Indicators continues in Buy mode as +DI remains above –DI. MFI (64) suggests Positive Money Flow. Thus Oscillators are indicating a mixed picture in the near term.

This week, both the indices again tested the short term average of 20dma (Sensex – 28493 and Nifty – 8779) for two days but managed to close the week above it. Both the indices continue to remain above the medium term average of 50dma (Sensex – 28172 and Nifty – 8676) and even the long term average of 200dma (Sensex – 26062 and Nifty – 7973). Thus the trend in the short term has remained bullish, whereas the trend in the medium term and even the long term timeframe continues to remain Bullish.

Options data for September series indicate highest Call Open Interest build-up at the strike of 9000 and highest Put build-up has shifted to 8500. Thus Options data suggests a trading range with resistance coming in at 9000 and support at 8500.

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy Maruti

5573

5755

5634

150

Rs. 9,150

Glenmark

913

945

954

700

Rs.28,700

Buy UPL

692

715

707

1200

Rs.18,000

Buy Sintex

82

86

89

7125

Rs.49,875

Buy GNFC

168

175

180

5000

Rs.60,000

Total

Rs.1,65,725.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8543

8642

8746

8831

8937

9024

9119

Sensex

27627

28010

28462

28668

29077

29448

29844

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy RelianceInd

1102

1079

1137

1173

Buy BharatForge

943

922

975

1008

Buy IOC

583

570

603

625

Buy IRBInfra

261

255

270

280

Buy JindalSaw

55

53

59

64

WATCH OUT FOR:

IRB

MRF

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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