Archives : TREND TURNS BEARISH - 04/11/2016.

TREND TURNS BEARISH - 04/11/2016.

SELL ON EVERY RISE.

After giving a Bearish Head & Shoulders pattern breakout, both the indices went higher to retest the Right Shoulder and in the process registered a Lower Top (Sensex - 28256 and Nifty - 8736). Post the above price movement, both the indices managed to break the critical price support of Sensex 27716 and Nifty 8555. As a result, both Sensex and Nifty have now resumed the downward journey towards achieving the H&S target of Sensex 26352 and Nifty 8139; besides the obvious testing to 200dma. Since the short and medium term trends are bearish, every pull-back will be an opportunity to go short.


TREND TURNS BEARISH - 04/11/2016.

SELL ON EVERY RISE.

After giving a Bearish Head & Shoulders pattern breakout, both the indices went higher to retest the Right Shoulder and in the process registered a Lower Top (Sensex - 28256 and Nifty - 8736). Post the above price movement, both the indices managed to break the critical price support of Sensex 27716 and Nifty 8555. As a result, both Sensex and Nifty have now resumed the downward journey towards achieving the H&S target of Sensex 26352 and Nifty 8139; besides the obvious testing to 200dma. Since the short and medium term trends are bearish, every pull-back will be an opportunity to go short.

TECHNICALLY SPEAKING.

Sensex opened the week at 27966, made a high of 28029, low of 27193 and closed the week at 27274. Thus it closed the week with a loss of 656 points. At the same time the Nifty opened the week at 8653, made a high of 8669, low of 8400 and closed the week at 8433. Thus the Nifty closed the week with a loss of 192 points.

On the weekly charts, both Sensex and Nifty have formed a big black body candle in line with the downtrend. On the daily charts, both the indices have formed an Opening Black body Marubuzo. Thus daily as well as weekly candlestick study indicates a bearish bias in the near term.

The past week once again saw a formation of Bearish Measuring Gap between Sensex 27679-27845 and Nifty 8549-8614. The target as per Gap theory falls at Sensex 26447 and Nifty 8195. Besides, this Gap will also act as strong Resistance in the near term.

Both the indices are witnessing pattern formations of various degrees. Primary pattern being the Bearish Rising Wedge, the least target as per this Bearish pattern falls at Sensex 26522 and Nifty 8142 and extended lower targets are at Sensex 25073 and Nifty 7656. Besides, a Bearish Head and Shoulders pattern was also completed, with target of Sensex 26352 and Nifty 8139. Also a higher degree Bearish Falling Wedge breakout has occurred this week and the target as per that pattern falls at Sensex 26008 and Nifty 8062. The Head and Shoulders pattern as well as Bearish Falling Wedge pattern can fail only if we close above recent lower tops i.e. above Sensex 28256 and Nifty 8736.

The current fall is a Retracement of the rise from Sensex 25911 to 29077 and Nifty from 7927 to 8968. The relevant Retracement levels are placed at Sensex 27867-27494-27120 and Nifty 8570-8447-8325. Since the Correction is getting extended, we will have to check the Retracement levels of the entire rise from Sensex 22494 to 29077 and Nifty from 6825 to 8968. The relevant extended Correction levels are placed at Sensex 26562-25786-25009 and Nifty 8150-7897-7644.

MACD and Price ROC are both negative and continue in Sell mode. RSI (32) continues to remain below the centreline, indicating bearish momentum. Stochastic Oscillator %K (06) is below %D, indicating a continuation in Sell mode, despite being oversold. Bollinger Band gave a fresh Sell signal on Wednesday, when price closed below the lower Bollinger Band. ADX has improved to 20 which suggest that downward trend is being developed. Directional Indicators continues in Sell mode as +DI remains below –DI. MFI (40) suggests Negative Money Flow. OBV continues in Sell mode, making lower Top, lower Bottom formation. Thus Oscillators are suggesting a bearish bias.

This week, both the indices continued to trade below the short term average of 20dma (Sensex – 27867 and Nifty – 8623) as well as the medium term average of 50dma (Sensex – 28171 and Nifty – 8703). Both the indices continue to remain above the long term average of 200dma (Sensex – 26404 and Nifty – 8097). The market movement suggests a possible test of the long term average of 200dma. Thus the trend in the short term and medium term remains bearish whereas the trend in the long term timeframe still continues to remain Bullish.

Options data for November series indicate highest Call Open Interest build-up at the strike of 9000 and highest Put build-up has shifted to 8200. Thus Options data suggests a wide trading range with resistance coming in at 9000 and support at 8200. On Friday, 8500 Call added very high Open Interest which indicates immediate resistance.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8146

8242

8353

8433

8518

8614

8736

Sensex

26080

26468

26872

27274

27637

27952

28256

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell Maruti

5705

5839

5503

5300

Sell AjantaPh

1877

1917

1816

1753

Sell ABNuvo

1283

1315

1235

1186

Sell Biocon

878

898

847

815

Sell Havells

386

395

372

357

WATCH OUT FOR:

Nifty H&S

Maruti

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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