Weekly analysis : BLACK FRIDAY REVISITED - 21/09/2018.

BLACK FRIDAY REVISITED - 21/09/2018.

 

NBFCs CRACK, MARKET HITS PANIC MODE.

 

There was no respite for the Bulls as each passing day brought more and more bearishness. On Friday, the ongoing crisis at IL&FS created a panic across NBFCs especially DHFL and IndiaBulls Housing Finance which cracked by around 60% and 30% respectively before recovering partially, despite the Management denying any liquidity crisis to meet any loan obligations. As a result the markets cracked and Sensex saw an intraday fall of around 1500 points and Nifty around 500 points before staging a smart recovery. But the key question remains have we made a bottom? The answer is NO. The long lower shadow on Friday shows some brave Bulls having bought at lower levels but that cannot certify a bottom creation. Friday saw a Panic Bottom being created but usually a Panic bottom is retested and which looks likely even this time. After witnessing some relief, the Nifty is likely to test 10748-10643.

 


BLACK FRIDAY REVISITED - 21/09/2018.

 

NBFCs CRACK, MARKET HITS PANIC MODE.

 

There was no respite for the Bulls as each passing day brought more and more bearishness. On Friday, the ongoing crisis at IL&FS created a panic across NBFCs especially DHFL and IndiaBulls Housing Finance which cracked by around 60% and 30% respectively before recovering partially, despite the Management denying any liquidity crisis to meet any loan obligations. As a result the markets cracked and Sensex saw an intraday fall of around 1500 points and Nifty around 500 points before staging a smart recovery. But the key question remains have we made a bottom? The answer is NO. The long lower shadow on Friday shows some brave Bulls having bought at lower levels but that cannot certify a bottom creation. Friday saw a Panic Bottom being created but usually a Panic bottom is retested and which looks likely even this time. After witnessing some relief, the Nifty is likely to test 10748-10643.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 38027, made a high of 38027, low of 35993 and closed the week at 36841. Thus it closed the week with a loss of 1249 points. At the same time the Nifty opened the week at 11464, made a high of 11464, low of 10866 and closed the week at 11143. Thus the Nifty closed the week with a loss of 372 points.

 

On the daily charts, both Sensex and Nifty have formed real black body candles on all the four days of the week with Friday being the climax.  Friday saw a big Black body candle with a very long lower shadow which indicates recovery from lower levels. On the weekly charts, both the indices have formed a big Opening Black Body Marubuzo which is in line with Bearishness. Thus daily as well as weekly candlestick formations are suggesting a Bearish Bias.

 

Higher degree Correction levels are placed at Sensex 36504-35736-34969 and Nifty 11069-10856-10643. The Bears were relentless this week as each day saw Bears hammering down the index, with Friday’s big fall saw both the indices taking support at the 50% Correction level before staging a swift recovery.

 

As per Gap Theory when the first Gap was filled, it gave an indication that all three Gaps will be filled and it happened that way. Interestingly this week saw the First Gap (i.e. between Sensex 36019-35977 and Nifty 10876-10860) in the Rally which was the Breakaway Gap acting as a strong Support for the market. Market made a bottom on Friday i.e. Sensex at 35993 and Nifty 10866, which was exactly in this Gap Support mentioned above before the rebound.

 

Both Sensex and Nifty are in Correction mode and any closing above the confluence zone of Sensex 38360-38421 and Nifty 11565-11603 will signal the end of Correction.

 

Both Sensex and Nifty had completed a Rounding Bottom formation and the Target as per that pattern falls at Sensex 40403 and Nifty 12391. Also both the indices had completed a Bullish Cup and Handle pattern which has a target of Sensex 39503 and Nifty 11907. The above targets will be achieved as long as Sensex remains above 34937 and Nifty above 10557.

 

This week, both the indices tested and closed below both the short term average of 20dma (Sensex – 38067 and Nifty – 11498) as well as medium term average of 50dma (Sensex – 37557 and Nifty 11342). Both the indices are still above the long term average of 200dma (Sensex – 35232 and Nifty – 10748). Thus the trend in short term as well as medium term timeframe has turned down, whereas the trend in the long term time-frame remains Up.

 

MACD and Price ROC are in Sell mode. RSI (37) suggests Bearish momentum. Stochastic Oscillator %K (17) is below %D and hence in Sell mode. ADX is now at 28, suggesting that the Down Trend is gaining strength. Directional Indicators are in Sell mode as +DI is below –DI. MFI (26) suggests Negative Money Flow. OBV has started lower top lower bottom formation. Bollinger Band continues with its Sell signal. Thus Oscillators are suggesting a bearish bias.

 

Options data for September series indicate highest Call Open Interest is at the strike of 11500 whereas the highest Put build-up is at the strike of 11000. Thus Options data suggests a trading range with resistance at 11500 & support at 11000.

 

THIS WEEKS RECOMMENDATIONS:


STOCK

CMP

SL

Tgt-1

Tgt-2

Eicher Motors

27940

28510

27061

26170

Sell Bharat Fin

1090

1112

1057

1023

Sell Titan

801

819

774

746

Sell MCX

753

769

729

704

Repco Home

464

473

450

435

 

INDEX LEVELS:


 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

10860

10976

11059

11143

11250

11340

11430

Sensex

35555

35993

36419

36841

37134

37559

38022


WATCH OUT FOR:

 

Titan
 
MCX
 
 
 
 
 
 
 

 

 


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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