Archives : 20DMA ACTS AS SUPPORT - 16/06/2017.

20DMA ACTS AS SUPPORT - 16/06/2017.

 

CONSOLIDATION CONTINUES.

 

Market has spent the last two weeks in consolidating the upward gains. This week both the indices have taken support at the short term average of 20dma (Sensex – 31028 and Nifty – 9585). A break of this support will result in the market entering a short term corrective mode. One needs to keep in mind that such Retracements are healthy for the long term uptrend of the market. Any decline should be used by the market participants to go long.

 



20DMA ACTS AS SUPPORT - 16/06/2017.

 

CONSOLIDATION CONTINUES.

 

Market has spent the last two weeks in consolidating the upward gains. This week both the indices have taken support at the short term average of 20dma (Sensex – 31028 and Nifty – 9585). A break of this support will result in the market entering a short term corrective mode. One needs to keep in mind that such Retracements are healthy for the long term uptrend of the market. Any decline should be used by the market participants to go long.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 31225, made a high of 31260, low of 31017 and closed the week at 31056. Thus it closed the week with a loss of 206 points. At the same time the Nifty opened the week at 9646, made a high of 9654, low of 9560 and closed the week at 9588. Thus the Nifty closed the week with a loss of 80 points.

 

On the daily charts, Sensex has formed a small black body candle in the sideways consolidation, whereas Nifty has formed a Homing Pigeon. It is a bullish reversal pattern which requires confirmation. On the weekly charts, both the indices have formed a small black body candle which is not a confirmation for the Bearish Doji which was registered last week. Thus candlestick study indicates further consolidation with a slight bearish bias in the near term.

 

On Thursday and Friday, the market was rescued by the short term average of 20dma (Sensex – 31028 and Nifty – 9585) which acted as strong support. A breach of this support will not only result in the short term trend turning down, but also open the path towards testing of the medium term average of 50dma (Sensex – 30360 and Nifty – 9410). Both the indices continue to remain above the long term average of 200dma (Sensex – 28444 and Nifty – 8792). Thus the Trend in the short term, medium term and the long term timeframe continues to be Bullish.

 

Both the indices had left behind a bullish gap between Sensex 29780-29681 and Nifty 9250-9225. This gap was tested and it successfully acted as Support. Thus a break of this Support will turn the medium term trend to bearish.

 

In the previous fall, the market went down to test the strong support in the form of the weekly gap i.e. between Sensex 29356-29098 and Nifty 9060-8977. This gap provided support and the indices recovered from that level. This Gap is now very significant as a break of this Gap will turn the intermediate trend to bearish. Besides acting as a support, this gap also acts as a Measuring Gap. The target as per Gap theory falls at Sensex 32737 and Nifty 10144.

 

Both the indices have already achieved the golden ratio target (Sensex – 31153 and Nifty 9630) of Saucer formation. The Saucer pattern was completed when the indices closed above Sensex 29077 and Nifty 8968. The complete pattern target which is at Sensex 32437 and Nifty 10043 remains to be achieved. On the weekly formation, both the indices completed a Cup and Handle formation and the targets are Sensex 34677-37554 and Nifty 10536-11413.

 

If one considers the Cup and Handle formation of 7 years from 2007 to 2014, the target for that pattern falls at Sensex 34715 and Nifty 10462. The Golden Ratio target of the current pattern weekly pattern of 2 years is at Sensex 34677 and Nifty 10536. Thus in the medium term one can expect a test of the above targets i.e. Sensex 34677-34715 and Nifty 10462-10536.

 

MACD and Price ROC, both continue in Sell mode. RSI (56) suggests Bullish momentum. Stochastic Oscillator %K (34) is below %D and hence in Sell mode. ADX is at 29 which suggest that the Uptrend is undergoing further consolidation. Directional Indicators continue in Buy mode as +DI remains above –DI. MFI (47) suggests Negative Money Flow. OBV continues to make higher top, higher bottom formation. Bollinger Band continues with its Buy signal. Thus Oscillators are suggesting a mixed bias.

 

Options data for June series indicate highest Call Open Interest is at the strike of 9700 and highest Put build-up is at 9500. Thus Options data suggests a trading range with resistance coming in at 9700 and support at 9500.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

9301

9390

9498

9588

9688

9762

9844

Sensex

30007

30338

30712

31056

31430

31889

32223

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Nestle

6759

6629

6957

7163

Buy CoLPaL

1094

1072

1127

1162

Buy Indigo

1212

1185

1253

1295

Buy Ujjivan

324

318

333

343

Buy L&TFin

146

143

151

157

 

WATCH OUT FOR:

 

CoLPaL

 

Bosch

 

 

 

 

 

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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