Weekly analysis : TAKING SUPPORT @ 200DMA - 25/09/2020

TAKING SUPPORT @ 200DMA – 25/09/2020.

 

NIFTY HOLDS ON TO 11000.

 

After enjoying a one way parabolic rise since March; Correction had become a necessity for the well being of the Market. After breaching the steep Support Trendline two weeks back, the Correction intensified in the week gone by. Markets corrected this week, before finding Support at the 200dma. Interestingly, Friday saw a bounce-back from the 200dma which helped the Nifty close above the 11000 mark, but it does not signal an end to the Correction. The daily as well as weekly candlestick pattern suggests continuation of bearishness. Also the completion of Head & Shoulders pattern indicates bearish connotations in the near term. It has a bearish Target of Nifty 10588 and hence any upward price movement for a day or two will not negate the Bearish Head & Shoulders pattern.

 


TAKING SUPPORT @ 200DMA – 25/09/2020.

 

NIFTY HOLDS ON TO 11000.

 

After enjoying a one way parabolic rise since March; Correction had become a necessity for the well being of the Market. After breaching the steep Support Trendline two weeks back, the Correction intensified in the week gone by. Markets corrected this week, before finding Support at the 200dma. Interestingly, Friday saw a bounce-back from the 200dma which helped the Nifty close above the 11000 mark, but it does not signal an end to the Correction. The daily as well as weekly candlestick pattern suggests continuation of bearishness. Also the completion of Head & Shoulders pattern indicates bearish connotations in the near term. It has a bearish Target of Nifty 10588 and hence any upward price movement for a day or two will not negate the Bearish Head & Shoulders pattern.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 38812, made a high of 38990, low of 36495 and closed the week at 37488. Thus it closed the week with a loss of 1357 points. At the same time the Nifty opened the week at 11503, made a high of 11535, low of 10790 and closed the week at 11050. Thus the Nifty closed the week with a loss of 454 points.

 

On the daily charts, both the indices have formed a real white body candle. Last three days have formed a Downward Tasuki Gap which is a Bearish Continuation pattern. Also on the weekly timeframe, both Sensex and Nifty have formed a big Black body candle which can be categorised as Bearish Mat Hold pattern, with a small leniency that we have had two rest days instead of three. Thus daily as well as weekly candlestick pattern suggests a bearish bias in the near term.

 

This week, both the indices completed a Bearish Head & Shoulders pattern on the daily timeframe. This formation has a bearish Target at Sensex 35982 and Nifty 10588. The failure point will be a closing above the top of right shoulder which is at Sensex 39359 and Nifty 11618.

 

The Markets had moved very far away from the averages and a retest of the 200dma was on cards, which happened last week. After such a sharp fall for six straight days, a Pull-back was on the cards. It happened and the Nifty reclaimed the 11000 mark. Moving higher the indices can encounter Resistance in the form of Trendline (Sensex 38433 & Nifty 11239), which is also the Neckline of Bearish Head & Shoulders.

 

This week, Market breached the short term average of 20dma (Sensex – 38447 and Nifty – 11354) and even the medium term average of 50dma (Sensex – 38298 and Nifty – 11298), before taking Support at the long term average of 200dma (Sensex – 36565 and Nifty – 10757). Thus the Trend in the Short Term as well as Medium Term Timeframe has turned Bearish, whereas the Trend in the Long Term Timeframe continues to be Upwards.

 

MACD as well as Price ROC are both negative and continue in Sell mode. RSI (41) suggests Bearish momentum. Stochastic Oscillator %K (17) is above %D and hence in Buy mode. ADX (22) suggests Downtrend getting developed. Directional Indicators are in Sell mode as +DI went below –DI. MFI (49) suggests Negative Money Flow. OBV has started making lower top lower bottom. Bollinger Band has given a Sell signal on Tuesday when Nifty closed below the lower Bollinger Band. Thus Oscillators are suggesting a Bearish bias.

 

Options data for October series indicate highest Call Open Interest at the strike of 11500. Highest Put build-up is at the strike of 10500. Thus Options data suggest a wide trading range with Resistance @ 11500 & Support @ 10500.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

10637

10790

10933

11050

11185

11289

11394

Sensex

35877

36495

36911

37388

37785

38252

38617

 

THIS WEEKS RECOMMENDATIONS:

 

This week is expected to be very volatile and uncertain and hence Pair Strategies are suggested which should be done on a Rupee Neutral basis.

 

PAIR NO.

STOCK

CMP

SL

TGT - 1

TGT -2

1

Buy

Apollo Hosp

2027

1986

2089

2155

Sell

HDFC Bank

1044

1064

1014

983

2

Buy

CoForge

2304

2254

2381

2462

Sell

Auro Pharma

772

787

749

725

3

Buy

India Mart

5253

5144

5419

5587

Sell

Axis Bank

415

425

400

384

 

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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