Archives : 2012 STARTS WITH A WHITE CANDLE - 06/01/2012.

2012 STARTS WITH A WHITE CANDLE   06/01/2012.

SHORT TERM TREND REVERSAL.

The good news is that the New Year has started with a white body candle formation on the weekly charts, but that does not mean that the bearishness has been overturned. It only suggests a pull-back in the short term timeframe. One positive aspect this week has been the closing above the short term moving average of 20dma, because of which the short term trend has turned positive. But the weekly closing has been just below the 200 Weeks Moving Average (Sensex – 15874 and Nifty – 4766). A weekly closing above the 200 Weeks Moving Average will strengthen the upward price movement.

 

 


2012 STARTS WITH A WHITE CANDLE   06/01/2012.

SHORT TERM TREND REVERSAL.

The good news is that the New Year has started with a white body candle formation on the weekly charts, but that does not mean that the bearishness has been overturned. It only suggests a pull-back in the short term timeframe. One positive aspect this week has been the closing above the short term moving average of 20dma, because of which the short term trend has turned positive. But the weekly closing has been just below the 200 Weeks Moving Average (Sensex – 15874 and Nifty – 4766). A weekly closing above the 200 Weeks Moving Average will strengthen the upward price movement.

TECHNICALLY SPEAKING.

The Sensex opened the week at 15534, made a high of 16004, a low of 15358 and closed the week at 15867. The Sensex gained 413 points on a weekly basis. Similarly Nifty opened the week at 4640, made a high of 4794, a low of 4588 and closed the week at 4754. The Nifty too closed with a weekly gain of 130 points. 

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Both Sensex and Nifty have formed a white body candle on the weekly charts. The weekly candle tested the 200 Weeks Moving Average and closed just below that level. On the daily charts, both Sensex and Nifty have formed a small white body candle with big upper and lower shadows. After forming a big white body candle on Tuesday, there were small candlestick formations on Wednesday, Thursday and Friday. These candles had smaller bodies and were like rest days, after a big white body candle was formed on Tuesday. If we have a big white body candle on Monday, which closes above Sensex 16001 and Nifty 4794, then the entire formation will be Rising Three Method, which is a Bullish Continuation pattern.

Both Sensex and Nifty have formed a Resistance zone at Sensex 16049 – 16069 and Nifty 4800 – 4819. This Resistance zone has been formed by the presence of two minor tops and the 50% Retracement of the immediate fall from Sensex 17003 to 15135 and Nifty 5099 to 4531.

Short term Trend has reversed as the Sensex and Nifty have managed to close above their short term average of 20dma (Sensex – 15727 and Nifty – 4709). Both Sensex and Nifty are below their medium term average of 50dma (Sensex – 16351 and Nifty – 4905) and long term average of 200dma (Sensex – 17517 and Nifty – 5259). As a result the Short term trend has turned Bullish, while the Medium term and Long term trend continue to be Bearish. Besides this, both the indices have once again closed just below their 200 Weeks moving average (Sensex – 15874 and Nifty – 4766). The market needs to close above this level, if any upmove has to sustain.

For more than a year, both the indices have been moving lower in a Falling Channel. In case of the indices breaching their recent lows, the market will fall to test the lower end of the Falling Channel, which should act as support. The support levels are at Sensex 14689 and Nifty 4396. The top end of the channel will provide resistance, is at Sensex 17507 and Nifty 5287. On a longer term timeframe the Bearish Head & Shoulders and Bearish Descending Triangle on the weekly charts still stand, and so do their targets. The target for the Bearish Head and Shoulders pattern on the weekly charts stands at Sensex 14651-13928 and Nifty 4357-4143. This target holds true as long as the Nifty stays below 5740.

Both Sensex and Nifty have formed another big Bearish Head & Shoulders pattern on the weekly charts. The targets for this bearish pattern are Sensex 10387 and Nifty 3080. This pattern is a derived pattern which has been completed even as the market is on the verge of achieving the targets of primary distribution pattern of Bearish Head & Shoulders and Bearish Descending Triangle as discussed in the above paragraph.

The market is correcting the entire rise from 7697 to 21108 for the Sensex and 2252 to 6338 for the Nifty. The market has already breached and is below the 38.2% of the above mentioned rise. If the bearishness continues then it is likely to move towards the next Fibonacci Retracement levels of 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.

The Golden Ratio Target of the current rise of Sensex from 15765 to 17908 and Nifty from 4720 to 5399, falls at Sensex 14440 and Nifty 4300. This level coincides with the 50% Retracement level of the entire rise (Sensex – 14402 and Nifty – 4295) and hence we have a confluence zone between Sensex 14440-14402 and Nifty 4300-4295. This zone will act as strong support for both the indices.

MACD continues with its Buy signal even though in negative territory. ROC is in positive zone and continues with its Buy signal. RSI has been hovering below the centerline and is currently at 48, thus continuing in its Sell mode. Stochastic Oscillator has given a Buy as %K is above %D. Directional Indicators are in Sell mode as +DI is below –DI. ADX is at 16, indicating lack of any trend. MFI is consolidating below the centerline and is currently at 47. OBV continues in its Sell mode with its lower top, lower bottom formation. Thus oscillators are painting a mixed picture.

Nifty OI PCR is at a level of 1.27. Highest Open Interest is seen at 4500 Put. Highest Call writing is seen at 5000 strike. Hence one can expect Nifty to move in a band of 4500 on the lower side and 5000 on the higher side. Very high Open Interest has been added for the 4300 Put. This implies that in case the Nifty breaches the support of 4500, then the next significant support will be around 4300. 

Trendline Resistance for the Sensex is at 16169. Trendline Support for the Sensex is at 15478.

Trendline Resistance for the Nifty is at 4821. Trendline Support for the Nifty falls at 4619.

For the week ahead, Sensex will find Support at 15478-15097-14684 and will find Resistance at 16148-16432-16744.

For the week ahead, Nifty will find Support at 4645-4538-4448 and will find Resistance at 4839-4932-5034.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4448

4538

4645

4754

4839

4932

5034

Sensex

14684

15097

15478

15867

16148

16432

16744

LAST WEEKS RECOMMENDATIONS:

All the stocks reached their targets with ease. The Star Performers of the week were Adani Ent and Mundra Port which fell by 11% and 8% respectively. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Sell Kotak

430

421

418

500

Rs.6,000

Sell YesBnk

238

232

230

1000

Rs.8,000

Sell Adani

293

273

261

500

Rs.16,000

Sell DLF

183

177

173

1000

Rs.10,000

Sell Mundra

120

115

111

2000

Rs.18,000

Total

Rs.58,000

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy RCOM

77

75

81

85

Buy HDFCBnk

453

447

462

472

Buy Polaris

129

126

134

139

Buy Aban

352

347

361

371

Buy MTNL

25

24

27

29

WATCH OUT FOR:

RCOM

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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