Archives : PULL-BACK WITNESSED FROM OVERSOLD LEVELS - 06/11/2009

PULL-BACK WITNESSED FROM OVERSOLD LEVELS – 06/11/2009. 

After ten days of continues decline, the market finally heaved a sigh of relief as the global markets bounced back, giving a much needed boost to our oversold markets. A smart pull back was witnessed in the market starting from Wednesday onwards and continued till Friday.

Traders started panicking as the market opened with a gap down on Tuesday and never recovered through out the day and in the process lost more then 500 points, which forced major bull liquidation. The market exactly took support at the 50% retracement level of the current rise from 13219-17493 for the Sensex and 3918-5181 for the Nifty. These levels were mentioned exactly as our support levels in the previous week’s article.

 


PULL-BACK WITNESSED FROM OVERSOLD LEVELS – 06/11/2009. 

After ten days of continues decline, the market finally heaved a sigh of relief as the global markets bounced back, giving a much needed boost to our oversold markets. A smart pull back was witnessed in the market starting from Wednesday onwards and continued till Friday.

Traders started panicking as the market opened with a gap down on Tuesday and never recovered through out the day and in the process lost more then 500 points, which forced major bull liquidation. The market exactly took support at the 50% retracement level of the current rise from 13219-17493 for the Sensex and 3918-5181 for the Nifty. These levels were mentioned exactly as our support levels in the previous week’s article.

TREND - UP OR DOWN?

The short to medium term trend had turned negative in the week before last, when both Sensex and Nifty formed a strong bearish reversal pattern called Three Black Crows and breached the strong Trendline support, besides breaching and closing below the 50dma. The question on every traders mind is whether the uptrend has resumed or not? The first signal of short to medium term trend reversal will be when both Sensex and Nifty are able to close above their 50dma (Sensex-16425 and Nifty-4879). Second confirmation will be when both Sensex and Nifty are able to close above their 61.8% retracement of the current fall i.e. for the Sensex 17493-15330 and Nifty 5181-4538. It means that Sensex has to close above 16667 and Nifty above 4935 to resume a short to medium term uptrend.

 

However the long term uptrend continues. On the weekly charts both Sensex and Nifty had formed a bullish Head & Shoulder pattern and the neckline for that was at Sensex-15610 and Nifty-4715. During the course of the week, both the indices went below the neckline but the weekly close was above the neckline. Thus the bullish pattern formation stays intact and hence signaling a ray of hope for the bulls.

 

SENSEX. 

 

The Sensex opened the week at 15838, made a high of 16283, a low of 15330 and closed the week at 16158. The Sensex closed the week with a gain of 262 points.

 

On the weekly charts, Sensex has formed a small white body candle with a long lower shadow and a very small upper shadow, but it cannot be called a Hammer. The long lower shadow represents a magnificent pull back witnessed from the lows of the week i.e. from 15330. On Friday, the Sensex has formed a small white body Spinning Top with a slightly long upper shadow indicating selling pressure at higher levels. This is a neutral formation and the next days candle will be decisive.

For the short to medium term uptrend to resume, the Sensex needs to close above the 50dma which is placed at 16425. Till then the 50dma will act as resistance. The 100dma (15617) will continue to provide support.

 

If we consider the recent pullback witnessed from the low of 15330 then the pullback levels are 16156-16412-16667. The 50dma and the 50% correction level are almost coinciding and hence Sensex will find difficulty in crossing this level.

 

Sensex has taken support at the 50% retracement of the recent rise from 13219-17493, which was at 15336. If this level is breached, then the Sensex will further correct up to 61.8% retracement level which is at 14852. If we are considering a correction of the entire rise from 7697-17493, then the correction levels are 13751-12595-11439.

 

The indicators like MACD, RSI and ROC continue to remain in sell mode. The Money Flow Index is also not inspiring any confidence.

 

The Sensex has Trendline Resistance at 16695 and Trendline Support at 15438.

 

For the week ahead, Sensex will face Resistance at 16360-16546-16721. Sensex will find Support at 15842-15600-15330.

 

NIFTY. 

 

The Nifty opened the week at 4712, made a high of 4836, a low of 4538 and closed the week at 4796. The Nifty closed the week with a gain of 85 points.

 

On the weekly charts, Nifty has formed a small white body candle with a long lower shadow and a very small upper shadow, but it cannot be called a Hammer. The long lower shadow represents a pull back witnessed from the lows of the week i.e. from 4538. On Friday, the Nifty has formed a small white body candle with a long upper shadow almost resembling a Shooting Star, but the length of the upper shadow being lesser, cannot be classified as a Shooting Star and hence the next days candle will be decisive.

 

For the short to medium term uptrend to resume, the Nifty needs to close above the 50dma which is placed at 4879. Till then the 50dma will act as resistance. The 100dma (4637) will continue to provide support.

 

If we consider the recent pullback witnessed from the low of 4538 then the pullback levels are 4784-4860-4935. The 50dma and the 50% correction level are almost coinciding and hence Nifty will find difficulty in crossing this level.

 

Nifty has taken support at the 50% retracement of the recent rise from 3918-5181, which was at 4549. If this level is breached then the Nifty will proceed to 61.8% correction level which is at 4400. If we are considering a correction of the entire rise from 2252-5181, then the correction levels are 4062-3716-3371.

 

The indicators like MACD, RSI and ROC continue to remain in sell mode. The Money Flow Index is also not inspiring any confidence.

 

The Nifty has Trendline Resistance at 5140 and Trendline Support at 4576.

 

The O.I.PCR is showing improvement as it has improved to 1.19. Strong CALL writing is visible at 4900 strike which should act as resistance and strong PUT writing is visible at 4600 which should act as support.

 

For the week ahead, Nifty will face resistance at 4876-4936-5003. Nifty will find support at 4715-4645-4538.

 

INDEX LEVELS: 

 

 

 S3S2S1CLOSER1R2R3
Nifty4538464547154796487649365003
Sensex15330156001584216158163601654616721

 

LAST TIMES RECOMMENDATIONS:

This was an extraordinary week where all our readers must have achieved tremendous profits as all the stocks hit Jackpot!!! Shorting Aban proved to be a master stroke as can be seen below. 

 

 

STOCKReco PriceTgtReachedLot SizeProfit
Sell ABAN127411901092400Rs.72,800
Sell Siemens515497485752Rs.22,560
Sell RIL193118711802150Rs.19,350
Sell HDIL316292288774Rs.21,672
Sell ABNUVO793771760400Rs.13,200
    TotalRs.1,49,582

  

THIS WEEK’S RECOMMENDATIONS:

This week we recommend to hedge the below mentioned stocks by selling Nifty futures on a rupee neutral basis. 

 

STOCKCMPSLTGT-1TGT-2
Buy Engineers (I)1284122513681437
Buy Mphasis722704753785
Buy Aurobindo Phar818796854887
Buy Ashok Leyland51495558
Buy HCC134130140146

WATCH OUT FOR:

Engineers India

 

Mphasis

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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