Archives : BEARISHNESS TO INTENSIFY BELOW 9700 - 18/08/2017.

BEARISHNESS TO INTENSIFY BELOW 9700 - 18/08/2017.

 

SELLING PRESSURE AT HIGHER LEVEL.

 

As the Correction continues, markets are witnessing Selling at every higher levels and this will continue till the market conquers the Resistance zone of Nifty 9958-9965. A closing above this level will indicate end of Correction and resumption of prior Uptrend. On the other hand, a break of critical Support Trendline (Nifty-9712) will signal further intensification of Correction which will have Corrective levels placed at 9280-9015-8751.



BEARISHNESS TO INTENSIFY BELOW 9700 - 18/08/2017.

 

SELLING PRESSURE AT HIGHER LEVEL.

 

As the Correction continues, markets are witnessing Selling at every higher levels and this will continue till the market conquers the Resistance zone of Nifty 9958-9965. A closing above this level will indicate end of Correction and resumption of prior Uptrend. On the other hand, a break of critical Support Trendline (Nifty-9712) will signal further intensification of Correction which will have Corrective levels placed at 9280-9015-8751.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 31299, made a high of 31937, low of 31298 and closed the week at 31524. Thus it closed the week with a gain of 311 points. At the same time the Nifty opened the week at 9755, made a high of 9947, low of 9752 and closed the week at 9837. Thus the Nifty closed the week with a gain of 127 points.

 

On the daily charts, both Sensex and Nifty have formed an Opening Black body Marubuzo but it has a smaller body and a longer shadow which indicates a reduced bearishness. On the weekly charts, both the indices have formed a small white body candle which is on lines of Bullish Harami but it cannot be classified as it has formed near the top as per weekly chart. Thus daily as well as weekly candlestick patterns suggest bearishness in the near term.

 

Last week, the indices bounced back after taking Support at the critical Trendline which is at Sensex - 31269 and Nifty - 9712. A breach of this Trendline will push the market lower towards testing of intermediate bottom of Sensex 30680 and Nifty 9448. A further intensification in Correction will see the indices testing the Correction levels of entire rally of Sensex 7000 points and Nifty 2200 points. The relevant Correction levels are placed at Sensex 30024-29202-28379 and Nifty 9280-9015-8751.

 

The Correction will be deemed complete only when the indices close above their respective Resistance zone of Sensex 32053-32091 and Nifty 9958-9965 which is due to the confluence of 20dma and 61.8% Corrective level of the current fall. A closing above this Resistance zone will signal the end of Correction and a resumption of prior Uptrend.

 

The current Rally has produced two major Bullish Gaps. The first Bullish gap is on daily charts, between Sensex 29780-29681 and Nifty 9250-9225 will act as strong Support. The second Bullish Gap which is more critical 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.

 

This week, both the indices tested the short term average of 20dma (Sensex – 32053 and Nifty – 9958) and fell from there whereas the medium term average of 50dma (Sensex – 31646 and Nifty – 9790) provided good Support as the market recovered from that level. Thus a break of the medium term average will be an indication that the Correction will intensify and lower levels will be visited. But both the indices continue to remain above the long term average of 200dma (Sensex - 29193 and Nifty – 9028). Thus the Trend in the short term remains bearish, whereas the trend in the medium term and long term timeframe continues to remain upwards.

 

The weekly Bullish Gap between Sensex 29356-29098 and Nifty 9060-8977 forms a strong confluence Support zone as it encompasses the 200dma (Sensex - 29193 and Nifty - 9028) as well as the 50% Retracement level (Sensex - 29202 and Nifty - 9015). Thus if the Correction deepens then the indices will be finding this Gap Support as very strong and difficult to breach. Interestingly, this is the level where the current Cup and Handle formation was completed and a retest of the neckline will be good for the overall health of the market.

 

On the weekly formation, both the indices had 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 negative and continue in Sell mode. RSI (46) suggests bearish momentum. Stochastic Oscillator %K (42) is above %D and hence in Buy mode. ADX has dropped further to 26, which suggests that the trend is still intact, but losing strength. Directional Indicators continue in Sell mode as +DI remains below –DI. MFI (46) suggests Negative Money Flow. OBV is in Sell mode as it is making lower top, lower bottom formation. Bollinger Band continues with its Sell signal given in previous week. Thus Oscillators are suggesting a bearish bias.

 

Options data for August series indicate highest Call Open Interest remains at the strike of 10000 whereas the highest Put build-up has shifted higher at 9800. Thus Options data suggests a narrow trading range with resistance coming at 10000 & support at 9800.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

9532

9637

9723

9837

9944

10023

10114

Sensex

30444

30798

31193

31524

31911

32289

32672

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell OFSS

3432

3501

3327

3219

Sell Balkrishna

1489

1527

1432

1373

Sell L&T

1130

1157

1089

1047

Sell M&M

1370

1400

1325

1278

Sell Manappuram

85

87

81

77

 

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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