Archives : GRAPPLING WITH THE TARGET ZONE - 04/08/2017.

GRAPPLING WITH THE TARGET ZONE - 04/08/2017.

 

SENSEX TAKES SUPPORT AT 20DMA.

 

The market is in an interesting space where the indices are testing the Target Zone between 10100-10400; which is a confluence zone formed by various pattern targets across different timeframes. Hence it is not unusual to see the market retracing after achieving every target level. The markets will continue to wrestle with this confluence zone until it decisively overcomes this zone, which may require some sort of consolidation price-wise as well as time-wise. On Friday, Sensex took support at the short term average of 20dma before staging a bounce-back; as a result the trend still continues to remain upwards.



GRAPPLING WITH THE TARGET ZONE - 04/08/2017.

 

SENSEX TAKES SUPPORT AT 20DMA.

 

The market is in an interesting space where the indices are testing the Target Zone between 10100-10400; which is a confluence zone formed by various pattern targets across different timeframes. Hence it is not unusual to see the market retracing after achieving every target level. The markets will continue to wrestle with this confluence zone until it decisively overcomes this zone, which may require some sort of consolidation price-wise as well as time-wise. On Friday, Sensex took support at the short term average of 20dma before staging a bounce-back; as a result the trend still continues to remain upwards.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 32412, made a high of 32686, low of 32107 and closed the week at 32325. Thus it closed the week with a gain of 16 points. At the same time the Nifty opened the week at 10034, made a high of 10137, low of 9988 and closed the week at 10066. Thus the Nifty closed the week with a gain of 52 points.

 

On the daily charts, Nifty has formed a real white body candle whereas Sensex has formed a Thrusting pattern which is a bearish continuation pattern. On the weekly charts, Sensex has formed a black body Spinning Top whereas Nifty has formed a white body Spinning Top. Thus candlestick study indicates indecisiveness for the near term.

 

The current rally has seen the indices testing the strong upward Trendline Resistance (Sensex – 32702 and Nifty – 10103) last week. Even though Nifty managed to overcome this level for couple of days, but Sensex could not. Thus in the short term, further upward rally will be possible only if the indices manage to close above this Trendline Resistance.

 

This week, the indices registered fresh life-time highs and then retraced to a low of Sensex 32107 and Nifty 9988. In case if these levels are taken out on the lower side, then the consolidation can take the form of short term Correction. The immediate Retracement levels are placed at Sensex 31920-31683-31446 and Nifty 9875-9793-9712.

 

On the weekly charts, both Sensex and Nifty have completed a second degree Bullish Flag pattern, the target for which falls at Sensex - 33619 and Nifty – 10343. The above targets will be achieved as long as Sensex remains above 30680 and Nifty above 9448.

 

This week, both the indices tested and took support at the short term average of 20dma (Sensex – 32134 and Nifty – 9946). Besides, both Sensex and Nifty continue to remain above the medium term average of 50dma (Sensex – 31551 and Nifty – 9746) and even the long term average of 200dma (Sensex - 29026 and Nifty – 8973). Thus the Trend in the short term, medium term and even the long term timeframe continues to remain Bullish.

 

The current Rally has produced two major Bullish Gaps. The first Bullish gap between Sensex 29780-29681 and Nifty 9250-9225 will not only act as Support but holds the key to intermediate trend. The second Bullish Gap which is more significant as it is also a Weekly Gap i.e. between Sensex 29356-29098 and Nifty 9060-8977 hold the key to the long term trend. 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.

 

A 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 has already been 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 are positive and in Buy mode. RSI (67) suggests strong bullish momentum. Stochastic Oscillator %K (75) is below %D and hence in Sell mode. ADX is at 33, which suggests that the Uptrend is strong. Directional Indicators continue in Buy mode as +DI is above –DI. MFI (73) suggests Positive Money Flow. OBV continues to make higher tops and bottoms. Bollinger Band continues with its Buy signal. Thus Oscillators are suggesting a bullish bias.

 

Options data for August series indicate highest Call Open Interest is at the strike of 10500 and highest Put build-up is at 10000. Thus Options data suggests a trading range with resistance coming in at 10500 and support at 10000.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

9792

9885

9978

10066

10144

10238

10343

Sensex

31353

31626

32037

32325

32737

33089

33389

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy EicherMotors

31637

31050

32523

33444

Buy HeroMoto

3956

3880

4070

4195

Buy YesBank

1807

1767

1869

1933

Buy MGL

1026

1008

1055

1085

Buy PCJewellers

259

253

268

278

 

WATCH OUT FOR:

 

MGL
 
Motherson Sumi

 

 

 

 

 


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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