Archives : BREAKDOWN ON EXPECTED LINES - 28/01/2011.

BREAKDOWN ON EXPECTED LINES – 28/01/2011. 

200DMA BREACHED.

 

There is no place to hide as the Bears rule the market. After a long time the 200dma was decisively broken. The last time the 200dma was broken, was way back in May 2010. This has caused lot of panic especially amongst the retail participants in the market. The mid-cap and small-cap prices have been smashed beyond recognition; they are quoting at yearly lows.

 

BROADENING PATTERN TARGET ACHIEVED.


BREAKDOWN ON EXPECTED LINES – 28/01/2011. 

200DMA BREACHED.

 

There is no place to hide as the Bears rule the market. After a long time the 200dma was decisively broken. The last time the 200dma was broken, was way back in May 2010. This has caused lot of panic especially amongst the retail participants in the market. The mid-cap and small-cap prices have been smashed beyond recognition; they are quoting at yearly lows.

 

BROADENING PATTERN TARGET ACHIEVED.

 

The fallout was not totally unexpected; the buildup was obvious when the market failed to cross the previous high. The bearish trend got confirmed when the higher bottom was breached. Infact, one needs to look at the bearish reversal pattern (Broadening Top) formed at the top. This pattern does not achieve the target in a linear way, but achieves its target in a complex slow grinding manner and in the process generating lot of whipsaws. The Broadening pattern target (Nifty 5520) has been achieved along with the Head and Shoulders target and hence we are likely to see some sharp movements on either side.

 

SHORT TERM NIFTY SUPPORT AT 5350-5400.

 

In the short term there is a cluster of supports coming in at Sensex 17900-18100 and Nifty 5350-5400 levels. One can expect the market to pause for a while, taking short term support, before resuming its downward journey. Any pullback from the short term support zone will be an opportunity to liquidate long positions or create short positions at higher levels. The first immediate hurdle will be the 200dma (Sensex – 18725 and Nifty – 5621) which will now act as a resistance.

 

TECHNICALLY SPEAKING.

The Sensex opened the week at 19095, made a high of 19340, a low of 18235 and closed the week at 18395. The Sensex lost a whopping 612 points on a weekly basis. Similarly Nifty opened the week at 5717, made a high of 5801, a low of 5459 and closed the week at 5512. The Nifty too closed with a loss of 184 points on a weekly basis.

 

Both the indices have formed a big Black body candle on the weekly charts which marks the continuation of the bearish trend. On the daily charts one can spot the formation of Bearish Three Black Crows starting from Wednesday to Friday.  On Friday there is an Opening Black body Marubuzo which is also a bearish formation. Bearish Candle formations on the daily and weekly charts suggest continuation of the down fall.

 

The market was hoping that the 200dma will hold, but this week the 200dma (Sensex – 18725 and Nifty – 5621) was breached and as a result the long term trend too has turned down. The short term as well as the medium term trend continues to be down as the market is well below the 20dma (Sensex – 19397 and Nifty – 5814) and 50dma (Sensex – 19637 and Nifty – 5889) respectively.

 

The market has formed lower top and lower bottom formation and as a result the medium term trend is down. The long term trend will stay intact as long as 17819 for the Sensex and 5348 for the Nifty remain intact.

 

If we consider the short term rise from 15960 to 21108 for the Sensex and 4786 to 6338 for the Nifty, then the retracement levels for the Sensex will be at 19141-18534-17927 and 5745-5562-5379 for the Nifty. If we consider the medium term rise from 13219-21108 for the Sensex and 3918 to 6338 for the Nifty then the retracement levels will be 18094-17163-16233 and 5414-5128-4842 for the Nifty. If we consider the entire rise from 7697 to 21108 for the Sensex and 2252 to 21108 for the Nifty, then the correction levels for the Sensex will be at 15985-14402-12820 and 4777-4295-3813 for the Nifty. There is also previous bottom at Sensex 17819 and Nifty 5348. There is a cluster of supports emerging in the region of Sensex 17900-18100 and Nifty 5350-5400 and hence these areas will act as strong supports.

 

Both the indices formed a Bearish Broadening Top formation and the target for both the indices have been reached this week. Also the first target for Bearish Head and Shoulders Pattern breakout has been achieved and now we are headed for the next target and that falls at 17834 for the Sensex and 5352 for the Nifty. Pattern formation is a dynamic process and a negative bearish pattern formation is in place and the target according to that is Sensex 17691-17484 and Nifty 5311-5261.

 

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 30 and continues with its Sell mode and is just about to enter oversold territory. OBV and Money Flow Index continue with their sell mode. The Stochastic Oscillator is in a Sell mode and %K is in oversold territory, while %D is not in oversold zone. The ADX has increased to 32 suggesting that the downtrend is gaining strength. The Directional Indicators continue to be in Sell mode as +DI is below -DI.

 

The options activity suggests that the highest buildup of Puts is at strike of 5400. Call writing is the highest at the strike of 5800, followed by 5700. Thus options activity suggest 5400 to act as support and 5700 - 5800 to act as resistance.

 

The Trendline Resistance for the Sensex is at 18732. The Trendline Support is at 18216.

 

The Trendline Resistance for the Nifty is at 5605. The Trendline Support is at 5499.

 

For the week ahead, Sensex will find Support at 18155-17914-17678 and will find Resistance at 18732-19074-19342.

 

For the week ahead, Nifty will find Support at 5433-5348-5260 and will find Resistance at 5624-5721-5824.

INDEX LEVELS: 

 S3S2S1CLOSER1R2R3
Nifty5260534854335512562457215824
Sensex17678179141815518395187321907419342

LAST WEEKS RECOMMENDATIONS:

Almost all the targets were reached with ease. The star performer being APiL, which fell by around 9%. 

STOCKReco. PriceTgtReachedLot SizeProfit
Sell Sasken1611531522000Rs.18,000
Sell ACC996983985250Rs.2,750
Sell APiL612581560500Rs.26,000
Sell PNB112510881088250Rs.9,250
Sell Escorts1471411351000Rs.12,000
    TotalRs.68,000

  

THIS WEEKS RECOMMENDATIONS:  

STOCKCMPSLTgt-1Tgt-2
Sell Polaris167171159150
Sell AdaniEnt576586560544
Sell Grasim2302233422392166
Sell Maruti1229124612031175
Sell Educomp474484458440
  

WATCH OUT FOR:

  

POLARIS

 

Grasim

 

Educomp

 

  

  
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