Archives : PULL-BACK HALTS AT FIRST RESISTANCE ZONE - 09/09/2011.

PULL-BACK HALTS AT FIRST RESISTANCE ZONE – 09/09/2011. 

BEARS COMEBACK.

 

Bear market rallies are fast, swift and sharp but the decline after that is faster, swifter and sharper. The pull-backs are usually seen when the market hits a support zone and the prices pushed up due to some demand setting in. But the major reason behind the sharp increase in prices can be attributed to excessive short positions in the market, who rush to cover their positions. As a result we witness sharp rallies but once the short covering dies down, then the rally will lose its steam and prices fall sharply. This is exactly what we have seen last week. Prices always prefer to traverse the path of least resistance and in our market that happens to point southwards.

   

PULL-BACK HALTS AT FIRST RESISTANCE ZONE – 09/09/2011.

BEARS COMEBACK.

 

Bear market rallies are fast, swift and sharp but the decline after that is faster, swifter and sharper. The pull-backs are usually seen when the market hits a support zone and the prices pushed up due to some demand setting in. But the major reason behind the sharp increase in prices can be attributed to excessive short positions in the market, who rush to cover their positions. As a result we witness sharp rallies but once the short covering dies down, then the rally will lose its steam and prices fall sharply. This is exactly what we have seen last week. Prices always prefer to traverse the path of least resistance and in our market that happens to point southwards.

TECHNICALLY SPEAKING. 

The Sensex opened the week at 16678, made a high of 17211, a low of 16488 and closed the week at 16866. The Sensex gained 45 points on a weekly basis. Similarly Nifty opened the week at 4998, made a high of 5169, a low of 4942 and closed the week at 5059. The Nifty too closed with a weekly gain of just 19 points.

 

This week too the Candlestick analysis suggests divergence in the daily and weekly charts. Just as last Friday, this Friday too a Bearish Reversal pattern called Bearish Engulfing has been formed. But Bearish Engulfing is a stronger and more bearish candlestick pattern as compared to Belt Hold formed last Friday. The weekly candle is small with long upper shadow and a comparatively smaller lower shadow. Even though it is a white body candle, it lacks the bullishness of the previous week’s candle. Daily charts have a bearish formation in place while the weekly formation does not inspire much confidence. Thus Candlestick analysis seems to suggest bearishness in the very short term.

 

Both the indices had left behind a Measuring Gap i.e. between Sensex 17664-17358 and Nifty 5323-5229. The target for the rally (Sensex 15891 and Nifty 4812) has already been achieved. This gap is also a Bearish Falling Gap and hence is acting as a strong resistance area in the current pull-back rally. The pull-back rally found strong resistance just before this gap and as a result there was a halt to this pull-back.

 

Both Sensex and Nifty have managed to close above the 20dma (Sensex -16646 and Nifty – 4997), and hence the short term trend is up. The market is well below the medium term average of 50dma (Sensex – 17692 and Nifty – 5316) and long term average of 200dma (Sensex – 18544 and Nifty – 5564). As a result the medium term and the long term trends continue to remain down.

 

The Pull-back was stopped in its track at the first Resistance Zone at Sensex 17311-17448 and Nifty 5188-5230 which is due to convergence of various resistance levels in this zone. 50% of the immediate fall i.e. from Sensex 19131 to 15765 and Nifty 5740 to 4720, coincide with 38.2% of the intermediate fall i.e. from Sensex 19811 to 15765 and Nifty 5944 to 4720. These levels are further aided by the presence of the start of the falling gap.

Above this, there exists a very strong resistance zone between Sensex 17664-17845 and Nifty 5323-5360. This resistance zone is formed by the convergence of the 61.8% of the immediate fall, 50% of the intermediate fall and 38.2% of the entire fall. This is further strengthened by the falling gap and 50dma. Thus we have second Resistance Zone between Sensex 17664-17845 and Nifty 5323-5360. 

From a broader perspective the market is correcting the entire rise from 7697 to 21108 for the Sensex and 2252 to 6338 for the Nifty. If the market breaches the current low of 15765 for the Sensex and 4720 for the Nifty, then the market is likely to move towards the 50% and 61.8% levels of the entire fall for the Sensex and Nifty. Those levels are 14402-12820 for the Sensex and 4295-3813 for the Nifty.

Both Sensex and Nifty had given a weekly Bearish Head & Shoulders breakout and after that the Bearish Descending Triangle also got completed. The target for Bearish Head and Shoulders falls at 14651-13928 for the Sensex and 4357-4143 for the Nifty. The target for the Bearish Descending Triangle falls at Sensex 13952 and Nifty 4200.

Oscillators are presenting a mixed picture. MACD has given a Buy signal but is still in negative territory. RSI has just given a Sell as it has moved below the centerline and is currently at 47. ROC continues with its Buy signal by being in the positive territory. The Stochastic oscillator is in overbought territory at 88. Directional Indicators continue in their Sell mode as –DI is still above +DI, but are converging. ADX has fallen to 32 suggesting that the downtrend has lost some of its strength. Money Flow is in buy mode as it has moved higher at 55, indicating money flowing in the market. Minor reversal is seen in the other lead indicator OBV.

Nifty OI PCR is currently at 1.44. Highest Call writing has shifted to 5200 strike price and highest Put writing is seen at 4800 strike. One can expect the Nifty to oscillate between 5200 on the higher side and 4800 on the lower side. The market might witness strong selling pressure if 4800 is breached. The next possible support will materialize only at 4400.

For the week ahead, Sensex will find Support at 16546-16232-15960 and will find Resistance at 17189-17482-17792.

For the week ahead, Nifty will find Support at 4965-4873-4786 and will find Resistance at 5163-5269-5373.

INDEX LEVELS:

 S3S2S1CLOSER1R2R3
Nifty4786487349655059516352695373
Sensex15960162321654616866171891748217792

LAST WEEKS RECOMMENDATIONS:

All the three pairs did exceptionally well and almost all the recommendations achieved their targets with ease. The Star Performer for the week was GSPL which went up by a whopping 10!!! 

PAIR NO.STOCKRec.priceTgt Reached Lot sizeProfit
1BuyColPaL98010221057250Rs. 19,250
SellPNB910887895250Rs. 3,750
2BuyGitanjali3193343481000Rs. 29,000
SellONGC2632562541000Rs. 9,000
3BuyGSPL1031111132000Rs. 20,000
SellPolaris1241191152000Rs. 18,000
      ProfitRs.99,000

THIS WEEKS RECOMMENDATIONS: 

STOCKCMPSLTgt-1Tgt-2
Sell SBI1952197619131872
Sell Glaxo2094211120672038
Sell HPCL360365351342
Sell IRB165169157149
Sell Exide137141131125
  

WATCH OUT FOR:

.

Glaxo

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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