Archives : 200 DMA HOLDS FOR NOW - 21/01/2011.
200DMA HOLDS FOR NOW 21/01/2011.
 

WILL THE SUPPORT HOLD?

 

As mentioned in the last weeks article, the market went lower to test the support at the 200dma and it held on to that support for this week. A minor pull-back is currently being witnessed and that pull-back will find lot of difficulty in crossing the strong resistance zone of 5900. The million dollar question is whether the 200dma will hold good or will the market prefer to breach that and seek lower levels. Looking at the current technical picture, the second scenario looks more likely to be played out. Also both the indices have given a Bearish Head & Shoulders pattern breakout and the target for the Sensex will be 17884 and for the Nifty 5352.


200DMA HOLDS FOR NOW 21/01/2011.
 

WILL THE SUPPORT HOLD?

 

As mentioned in the last weeks article, the market went lower to test the support at the 200dma and it held on to that support for this week. A minor pull-back is currently being witnessed and that pull-back will find lot of difficulty in crossing the strong resistance zone of 5900. The million dollar question is whether the 200dma will hold good or will the market prefer to breach that and seek lower levels. Looking at the current technical picture, the second scenario looks more likely to be played out. Also both the indices have given a Bearish Head & Shoulders pattern breakout and the target for the Sensex will be 17884 and for the Nifty 5352.

 
TECHNICALLY SPEAKING. 

The Sensex opened the week at 18911, made a high of 19167, a low of 18779 and closed the week at 19007. The Sensex gained 147 points on a weekly basis. Similarly Nifty opened the week at 5648, made a high of 5747, a low of 5624 and closed the week at 5696. The Nifty too closed with a gain of 42 points on a weekly basis.

 

Both the indices have formed a small white body on the weekly charts. The Sensex has made a Bullish Harami pattern, whereas the Nifty has failed to do so. On the daily charts, both the indices have formed a Doji formation on Friday. This is a sign of uncertainty and indecision and much will now depend on the candle formation on the next day.

The market is already below the 50dma (Sensex – 19751 and Nifty – 5925) and 20dma (Sensex – 19672 and Nifty 5894) and as a result the medium term as well as the short term trend continues to be down. The long term trend is still up as both the indices tested their 200dma successfully and are still hanging on to that support level of 200dma (Sensex – 18701 and Nifty – 5614). We are not yet out of the danger zone and one cannot rule out the possibility of retesting and possibly breaching the coveted level of 200dma.

 

Both the indices have taken support at the 200dma and are now undergoing a pull-back in the short term timeframe. If we consider the immediate fall of Sensex from 20664 to 18779, then the retracement levels are placed at 19499-19722-19944. Similarly for the Nifty, if we consider the immediate fall from 6181 to 5624, then the retracement levels are 5837-5902-5968. If we consider the entire fall from 21108 to 18779 for the Sensex, then the retracement levels are 19669-19944-20218. Similarly if we consider the entire fall of the Nifty from 6338-5624, then the correction levels are 5897-5981-6065. Checking the retracement levels it is visible there is a confluence zone between 19669 to 19722 for the Sensex and 5897-5902 for the Nifty and this zone will act as a resistance zone for the market going forward.

 

Both the indices have breached their higher bottoms at Sensex 18954 and Nifty 5690. Thus a lower top (Sensex 20664 and Nifty 6181) was already in place and now the lower bottom will be formed. Hence the medium term trend has turned negative but the long term trend will remain intact as long as Sensex 17819 and Nifty 5348 remains intact.

 

Let us now consider the medium term picture. Since both the indices have breached their previous bottom, we are in a medium term downtrend and hence we will consider the medium term rise from 15960 to 21108 for the Sensex and 4786 to 6338 for the Nifty. The correction levels for the Sensex then will be 19141-18534-17926 and for the Nifty the retracement levels will fall at 5745-5562-5379.

 

Both the indices have given a Bearish Head and Shoulders Pattern breakout. The target as a result of this bearish breakout for the Sensex is 18418-17834 and that for the Nifty is 5517-5352.

 

Majority of the oscillators are in Sell mode. The MACD and ROC continue to be in Sell mode besides being in negative territory. The RSI is at 37 and continues with its Sell mode. OBV and Money Flow Index continue with their sell mode. Only the Stochastic Oscillator has signaled a Buy. The ADX has increased to 29 suggesting that the downtrend is gaining strength. The Directional Indicators continue to be in Sell mode as +DI is below -DI.

 

The options activity has shifted to the next month series. Highest Open Interest is seen at 5600 Put and 6000 Call for the Feb series, which is suggestive of the trading range for the market in the near term. Highest addition in open interest is seen at 5400 Put which is suggestive of the support the market is expecting in the next month series.

 

The Trendline Resistance for the Sensex is at 19433. The Trendline Support is at 18755.

The Trendline Resistance for the Nifty is at 5885. The Trendline Support is at 5614.

 

For the week ahead, Sensex will find Support at 18779-18540-18309 and will find Resistance at 19247-19504-19768.

 

For the week ahead, Nifty will find Support at 5629-5567-5495 and will find Resistance at 5772-5855-5932.

 
INDEX LEVELS:
 
 S3S2S1CLOSER1R2R3
Nifty5495556756295696577258555932
Sensex18309185401877919007192471950419768
 
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