Archives : BEARS WREAK HAVOC ON D-STREET - 22/09/2017.

BEARS WREAK HAVOC ON D-STREET - 22/09/2017.

 

SHORT TERM TREND REVERSES.

 

Even though Sensex and Nifty are highly correlated, the price movement shown by both the indices of late indicates a divergence. Last week, Nifty made a fresh life-high, but Sensex failed to do so. As per classical theory, both the indices must confirm with each other in signalling a Buy, but it failed to do so as Sensex could not cross previous life-highs. Thus, this led to non-confirmation of the Buy signal. After falling for three days, markets collapsed under its own weight as the Bears wreaked havoc on Friday. Friday saw severe selling and as a result the short term trend has turned negative. Strong Trendline Support exists at 9891, a break of which will open the doors to testing the higher bottom which is at 9685.

 


BEARS WREAK HAVOC ON D-STREET - 22/09/2017.

 

SHORT TERM TREND REVERSES.

 

Even though Sensex and Nifty are highly correlated, the price movement shown by both the indices of late indicates a divergence. Last week, Nifty made a fresh life-high, but Sensex failed to do so. As per classical theory, both the indices must confirm with each other in signalling a Buy, but it failed to do so as Sensex could not cross previous life-highs. Thus, this led to non-confirmation of the Buy signal. After falling for three days, markets collapsed under its own weight as the Bears wreaked havoc on Friday. Friday saw severe selling and as a result the short term trend has turned negative. Strong Trendline Support exists at 9891, a break of which will open the doors to testing the higher bottom which is at 9685.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 32361, made a high of 32524, low of 31886 and closed the week at 31922. Thus it closed the week with a loss of 350 points. At the same time the Nifty opened the week at 10133, made a high of 10178, low of 9952 and closed the week at 9964. Thus the Nifty closed the week with a loss of 121 points.

 

On the daily charts, both the indices have formed a big Opening Black body Marubuzo. On the weekly charts, both Sensex has formed a Dark Cloud Cover which is a bearish reversal pattern, whereas Nifty has formed a Bearish Engulfing pattern. Interestingly, this week’s black body completely engulfs not only the white body of previous week but also the shadows, which makes it more bearish. Thus daily as well as weekly charts are suggestive of bearishness in the near term.

 

Both the indices are very near to the critical support in the form of Trendline which is at Sensex – 31824 and Nifty – 9891. A breach of this Trendline will push the market lower towards testing of higher bottom which is at Sensex 31128 and Nifty 9685. These bottoms should not be breached otherwise for the first time since December 2016; we will have a lower bottom in place.

 

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 have closed below the short term average of 20dma (Sensex – 31959 and Nifty – 10000). Interestingly, Sensex has closed below the medium term average of 50dma (Sensex – 31953 and Nifty – 9953) but Nifty has held on to the support of 50dma. Both the indices continue to remain above the long term average of 200dma (Sensex - 29816 and Nifty – 9235). Thus the Trend in the short term has turned bearish. In the medium term timeframe, Trend for Sensex has turned bearish. The trend in the long term timeframe continues to remain bullish.

 

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 are both in Buy mode. RSI (47) suggests bearish momentum. Stochastic Oscillator %K (66) is below %D and hence in Sell mode. ADX has dropped further to 17, which suggests no clear trend. Directional Indicators have given a fresh Sell signal. MFI (55) suggests Positive Money Flow. OBV continues in Buy mode. Buy signal in Bollinger Band has been negated. Thus Oscillators are suggesting a mixed bias.

 

Options data for September series indicate highest Call Open Interest is at the strike of 10200 whereas the highest Put build-up is at 9900. Thus Options data suggests a trading range with resistance coming at 10200 & support at 9900.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

9685

9783

9882

9964

10088

10178

10262

Sensex

30798

31220

31586

31922

32277

32589

32889

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell BajajFinserv

5231

5345

5060

4887

Sell UnitedSpirits

2466

2521

2383

2299

Sell CanFinHomes

2658

2721

2563

2467

Sell ACC

1688

1723

1635

1581

Sell UPL

807

824

781

754

 

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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