Archives : WEEK OF WHIPSAWS - 18/03/2011.

WEEK OF WHIPSAWS – 18/03/2011. 

Last week was a week of whipsaws as everyday had either a gap-up or gap-down opening but in the opposite direction of the previous days trend. As a result the stoplosses were triggered on a regular basis.






WEEK OF WHIPSAWS – 18/03/2011.

Last week was a week of whipsaws as everyday had either a gap-up or gap-down opening but in the opposite direction of the previous days trend. As a result the stoplosses were triggered on a regular basis. 


Currently the Nifty is trading between two Trendlines. One is providing support (5232) and other resistance (5524). Both Trendlines are part of a Symmetrical triangle set-up. Market is waiting for the Nifty to provide the required breakout. A Symmetrical triangle is a Continuation pattern and hence the natural tendency, in this case, will be to give a Bearish downside breakout. But we will wait for the actual breakout to occur and take it from there.


The Sensex opened the week at 18167 made a high of 18463, a low of 17849 and closed the week at 17878. The Sensex lost 296 points on a weekly basis. Similarly Nifty opened the week at 5436, made a high of 5537, a low of 5366 and closed the week at 5373. The Nifty too closed with a loss of 72 points on a weekly basis.

On the daily charts both the indices have formed a big black body candle which is almost like a Black body Marubuzo. This is a bearish formation. But on the weekly charts, both Sensex and Nifty have formed a small black body candle with a slightly long upper shadow. This long upper shadow is due to the selling pressure at higher levels. If we consider last three weeks candle then the formation is not very bearish. A big white body candle was formed three weeks back and last two weeks formed small black body candle which were within the trading range of the white candle formed three weeks back. This is a part of Rising Three Method, which is a Bullish continuation pattern. Mind you, the pattern is not yet complete, it will be complete only when a big white body candle is formed, and with a closing above the close of the white candle formed three weeks back i.e. a weekly close above 5538. In that case the uptrend will continue. The Rising Three Method will be negated, if we have a closing below 5308, which is the low of the white candle formed three weeks back.

The market went above the 20dma (Sensex – 18216 and Nifty – 5457) during the course of the week, but finally closed the week just below the 20dma. As a result the short term trend continues to be down. Long and medium term trend continue to be down as the market is trading below the 200dma (Sensex – 18914 and Nifty – 5677) and 50dma (Sensex – 18463 and Nifty – 5533).

Both Sensex and Nifty are holding on to the bearish crossover of the 50dma and 200dma. This does not augur well for the bulls from the long term point of view, as invariably the market has dropped substantially. This is the only the second time in the last six years that this bearish crossover of 50dma and 200dma has been observed. Last time, it was in March 2008 and market participants are well aware of the danger and remember how much damage it inflicted the last time around. 

Despite many unsuccessful attempts, both the indices were unable to cross the strong Resistance zone. The Resistance zone for the Sensex (18559-18582) is created by 38.2% of the medium term fall from 20664 to 17295 and 61.8% of the shorter term fall from 19340 to 17295 for the Sensex. For Nifty the Resistance zone (5561-5563) is created by 38.2% of the medium term fall from 6181 to 5177 and 61.8% of the shorter term fall from 5801 to 5177. Thus for any uptrend to resume, it is imperative that the market closes above the Resistance zone.

In case the Sensex and Nifty close above their Resistance zone, which is a less likely scenario, then the indices will already have conquered the 20dma and 50dma. Besides that the indices would have given a trendline breakout, which would result in Bullish Head & Shoulder breakout. The indices would then proceed to test the long term trend average at 200dma.

In case the 61.8% retracement of the recent rise from 17295-18736 for the Sensex and 5177-5608 for the Nifty; which falls at Sensex - 17845 and Nifty – 5342 is taken out, then the market might test its recent bottoms at Sensex 17295 and Nifty 5177. In Bear markets, the bottoms are normally breached and if that happens then we have to find lower support zones. Hence 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 for the Sensex and 5414-5128-4842 for the Nifty. If we consider the entire rise from 7697 to 21108 for the Sensex and 2252 to 6338 for the Nifty, then the correction levels for the Sensex will be at 15985-14402-12820 and 4777-4295-3813 for the Nifty. Thus in case, the low of Sensex 17295 and Nifty 5177 is breached; the Sensex is likely to test the cluster of supports emerging between 16233-15985 and Nifty between 4842-4777. 

MACD, even though in negative territory continues with its Buy signal, but has converged over its signal line, which is not exactly bullish. The ROC has turned negative and given a Sell signal. RSI is at 42, below the centerline, and as a result given a Sell signal. Stochastic Oscillator too is in a Sell mode as %K has cut %D from above and signaled a Sell. Money Flow is at 57 and is giving a Buy signal. OBV continues with its Buy signal. ADX is at 14 suggesting that the current trend has lost its strength. The Directional Indicators have given a Sell signal as +DI has cut –DI from above.

Nifty O.I. PCR has fallen to 1.08 which is a result of greater Call writing. Highest Put writing is seen at 5300, which is likely to act as a support. Call writing is seen at 5500 strike which will act as resistance.

The Trendline Resistance for the Sensex is at 18473. The Trendline Support is at 17735.

The Trendline Resistance for the Nifty is at 5524. The Trendline Support is at 5313.

For the week ahead, Sensex will find Support at 17679-17469-17276 and will find Resistance at 18167-18448-18736.

For the week ahead, Nifty will find Support at 5310-5238-5160 and will find Resistance at 5453-5524-5608.




All the pairs did very well but the pair of long NMDC and short ABG shipyard was the most successful. Surprisingly all the long stocks in all three pairs reached their targets with ease. 

PAIR NO.STOCKRec.priceTgt Reached Lot sizeProfit
1BuyGrasim235223912470125Rs. 14,750
SellJSWSt902876885250Rs. 4,250
2BuyNMDC2772842871000Rs. 10,000
SellABGship3493363371000Rs. 12,000
3BuyEscorts1281341371000Rs. 9,000
SellAndBnk1351291312000Rs. 8,000


Since the next week is expected to be very volatile, it is advised to hedge ones position. One can use Nifty Futures to hedge. 

Sell Infosys2941296629102878
Sell TataMotors1117113410931067
Sell FinTech754763741727
Sell CanBank608618592575
Sell HindZinc126128122117



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