Archives : ITS A CONSOLIDATION - 10/02/2017

ITS A CONSOLIDATION - 10/02/2017. 

DECLINE WILL BE A BUYING OPPORTUNITY.

The market is undergoing a consolidation after whipping up a staggering 10% upward movement in a short span of around six weeks; hence it is not uncommon to see the market moving sideways in the whole of last week. As a result of such sharp rally, many momentum oscillators have entered overbought territory and one can expect either a time-wise consolidation or a price-wise consolidation. Currently the indices are undergoing a time-wise consolidation, but one should not be surprised if the consolidation changes to price-wise correction, which should provide a buying opportunity.


ITS A CONSOLIDATION - 10/02/2017.

DECLINE WILL BE A BUYING OPPORTUNITY.

The market is undergoing a consolidation after whipping up a staggering 10% upward movement in a short span of around six weeks; hence it is not uncommon to see the market moving sideways in the whole of last week. As a result of such sharp rally, many momentum oscillators have entered overbought territory and one can expect either a time-wise consolidation or a price-wise consolidation. Currently the indices are undergoing a time-wise consolidation, but one should not be surprised if the consolidation changes to price-wise correction, which should provide a buying opportunity.

TECHNICALLY SPEAKING.

Sensex opened the week at 28340, made a high of 28487, low of 28149 and closed the week at 28334. Thus it closed the week with a gain of 94 points. At the same time the Nifty opened the week at 8785, made a high of 8822, low of 8715 and closed the week at 8793. Thus the Nifty closed the week with a gain of 53 points.

On the daily charts, both the indices have formed a small black body candle in line with the small body candles of last five days. On the weekly charts, Sensex has formed a Bearish Doji and Nifty has formed a black body Spinning Top. These are bearish formations which require conformation in the form of real black body candle for coming week. Thus daily candlestick pattern suggests a sideways bias whereas weekly pattern suggests a bearish bias.

Two weeks back, both the indices overcame the critical 61.8% Retracement level of Sensex 27994 and Nifty 8558, and as a result long term uptrend has resumed and the indices can be expected to target the previous top.

Last week, both the indices have completed a Bullish Flag pattern which is a Bullish Continuation pattern. The target as per this pattern falls at Sensex 28997-29165 and 9017-9029 for the Nifty. The above targets are likely to be achieved as long as Sensex remains above 27590 and Nifty above 8537.

After a sharp rally of 10% in the indices, both Sensex and Nifty are now moving sideways in a very narrow range of Sensex 28100-28500 and Nifty 8700-8820. A break of this range on the downside can take the indices to test the support levels which are seen at Sensex 27980-27590 and Nifty 8672-8537. A bullish break of the above trading range will lead the indices to test 29000 for the Sensex and 9000 for the Nifty.

MACD and Price ROC are both positive and continue in Buy mode. Both RSI (72) and Stochastic Oscillator %K (92) suggest bullish momentum, but both are overbought. ADX is at 38 which suggest that the Uptrend is very strong. Directional Indicators continue in Buy mode as +DI remains above –DI. MFI (70) suggests Positive Money Flow. OBV continues in Buy mode and continues to make higher top, higher bottom formation. Bollinger Band continues in Buy mode. Thus majority of Oscillators are suggesting a bullish bias in the near term. The Momentum Oscillators are in Overbought territory and we can expect some pull-back or consolidation in the near term, but that should be used as an opportunity to Buy.

This week, both the indices continued to remain above the short term average of 20dma (Sensex – 27764 and Nifty – 8591), medium term average of 50dma (Sensex – 27009 and Nifty – 8330) and even the long term average of 200dma (Sensex – 27204 and Nifty – 8377). Thus the trend in the short term, medium term and even the long term timeframe continues to remain upwards.

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

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8493

8598

8688

8793

8893

8996

9119

Sensex

27193

27590

27980

28334

28689

29077

29522

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy McDowell

2352

2292

2443

2537

Buy AdaniPort

311

303

323

336

MothersonSumi

355

347

367

380

Buy L&TFin

109

107

113

118

Buy NCC

87

85

91

96

WATCH OUT FOR:

Motherson Sumi

CESC

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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