Archives : THREE WHITE SOLDIERS - 20/01/2012.

THREE WHITE SOLDIERS   20/01/2012. 

5067 – 5099 – NIFTY RESISTANCE ZONE.

The candlestick pattern Three White Soldiers, on the weekly charts inspires a lot of confidence especially if one is a Bull. It is a Bullish Reversal pattern as it indicates a price reversal on the weekly charts.  But before jumping to any conclusion, one must keep in mind a fact that we are at 61.8% Retracement level of the previous fall for Sensex 17908 – 15135 and Nifty 5399 - 4531. This level was tested in the first week of December and the market was not able to close above that (Nifty fell after making a high of 5099). Interestingly taking into account the entire downfall from Nifty 6338, the corrections have been copy book as each time there is a minor upward movement; the market has tested the 61.8% level of the prior fall, before resuming the downtrend. Hence the Nifty level of 5067 – 5099 forms a critical Resistance Zone, which needs to be cleared for continuation of ongoing rally.

 


THREE WHITE SOLDIERS   20/01/2012. 

5067 – 5099 – NIFTY RESISTANCE ZONE.

The candlestick pattern Three White Soldiers, on the weekly charts inspires a lot of confidence especially if one is a Bull. It is a Bullish Reversal pattern as it indicates a price reversal on the weekly charts.  But before jumping to any conclusion, one must keep in mind a fact that we are at 61.8% Retracement level of the previous fall for Sensex 17908 – 15135 and Nifty 5399 - 4531. This level was tested in the first week of December and the market was not able to close above that (Nifty fell after making a high of 5099). Interestingly taking into account the entire downfall from Nifty 6338, the corrections have been copy book as each time there is a minor upward movement; the market has tested the 61.8% level of the prior fall, before resuming the downtrend. Hence the Nifty level of 5067 – 5099 forms a critical Resistance Zone, which needs to be cleared for continuation of ongoing rally.

TECHNICALLY SPEAKING. 

Sensex opened the week at 16086, made a high of 16788, low of 16037 and closed the week at 16739. Thus it registered a weekly gain of 585 points. At the same time the Nifty opened the week at 4844, made a high of 5064, low of 4827 and closed the week at 5048. Thus the Nifty went up by 182 points on a weekly basis.

Both Sensex and Nifty have formed a weekly Bullish Reversal pattern viz. Three White Soldiers. This pattern indicates a price reversal in the medium term timeframe charts. But on the daily charts, there is a Bearish Doji Star pattern formed, which is a Bearish Reversal pattern. For an ideal Bearish Doji Star, the candle before the doji should be a big white body candle, which is not the case here. Daily charts are not in unison with the weekly charts as the daily charts indicate a hurdle in the immediate short term, but the formation on the weekly charts is more reassuring for the bulls. Thus the next week’s expiry is set for an interesting time.

Medium and Short term Trend have reversed as the Sensex and Nifty continue to stay above their medium term average of 50dma (Sensex – 16082 and Nifty – 4823) and short term average of 20dma (Sensex – 16017 and Nifty – 4807). Both Sensex and Nifty continue to be below the long term average of 200dma (Sensex – 17384 and Nifty – 5220). As a result the Short term and Medium term trends are Bullish, while the Long term trend continues to be Bearish. Besides this, both the indices continue to stay above their 200 Weeks moving average (Sensex – 15885 and Nifty – 4769).

Both Sensex and Nifty are near to the 61.8% Retracement (Sensex – 16849 and Nifty – 5067) of the fall from Sensex 17908 to 15135 and Nifty 5399 to 4531. These levels are aided by the previous intermittent minor tops at Sensex -17003 and Nifty 5099.  This results in a formation of strong Resistance zone between Sensex 16849 – 17003 and Nifty 5067 – 5099. The market will need a close above Sensex 17003 and Nifty 5099 to completely remove the bearish effect of the Island Reversal.

Both Sensex and Nifty are on the verge of reaching the targets (Sensex – 16948 and Nifty – 5075) for an Ascending Triangle formation. Sensex reached a high of 16788 this week and Nifty reached 5064.

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 14583 and Nifty 4363. The top end of the channel will provide resistance, is at Sensex 17396 and Nifty 5270. 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.

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 and ROC continue with their Buy signals and are positive. RSI is moving higher and is at 68 indicating strong upward momentum. Stochastic Oscillator is in overbought zone since last week as %K is at 95. Directional Indicators are in Buy mode as +DI continues to remain above –DI. ADX has moved higher at 14, indicating lack of any trend. MFI has given a Buy signal and has moved higher and is currently at 67. OBV is moving higher by managing a higher top higher bottom trajectory.

Nifty O.I. PCR has moved quite high and is around 2.01. Lack of confidence amongst Call writers has resulted in increase of OI PCR value. Highest Open Interest has shifted to 4800 Put. Highest Call writing is seen at 5100 strike. Friday saw a high Open Interest addition to 4900 Put. Hence one can expect Nifty to move in a band of 4800 on the lower side and 5100 on the higher side. 

Trendline Resistance for the Sensex is at 16931. Trendline Support for the Sensex is at 16231.

Trendline Resistance for the Nifty is at 5114. Trendline Support for the Nifty falls at 4891.

For the week ahead, Sensex will find Support at 16408-16086-15745 and will find Resistance at 17048-17358-17671.

For the week ahead, Nifty will find Support at 4942-4839-4728 and will find Resistance at 5143-5229-5323.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4728

4839

4942

5048

5143

5229

5323

Sensex

15745

16086

16408

16739

17048

17358

17671

 LAST WEEKS RECOMMENDATIONS:

It was a great week for our readers as all the stocks reached their targets with ease with the exception of BeL. However the Star Performer of the week was Jindal S-W which went up by an astonishing 9%. !!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy LiCHsg

241

247

253

1000

Rs.12,000

Buy ITC

207

211

211

2000

Rs.8,000

Buy BeL

1520

1543

1535

125

Rs.1,875

Buy Escorts

76

79

79

4000

Rs.12,000

Buy JindalSW

466

496

511

500

Rs.22,500

Total

Rs.56,375

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy PNB

948

930

976

1010

Buy Titan

191

187

198

206

Buy BoB

779

766

797

817

Buy Opto Ckt

234

229

241

249

Buy IOB

86

84

89

93

WATCH OUT FOR:

PNB

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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