Archives : FALLING CHANNEL BREAKOUT - 03/02/2012.

FALLING CHANNEL BREAKOUT 03/02/2012. 

15 MONTHS CONSOLIDATION COMPLETED.

Finally it has happened; the market after moving in a Falling Channel for more than 15 months, gave the much awaited breakout. In the wake of this Bullish breakout, the entire fall of the last 15 months seems to be a consolidation of the entire upmove from the low of Sensex 7697 to a high of 21108 and Nifty from 2252 to 6338. Long term trend has reversed as the market has completed a bullish consolidation pattern in the form of Falling Channel on the higher timeframe chart. Besides this, the indices have managed to give a close above the long term average of 200dma. In the higher timeframe chart, a higher top higher bottom formation is yet to happen. First step in that direction will be a crossover of Sensex 17908 and Nifty 5399 which will signal a higher top formation on the weekly charts.

 


FALLING CHANNEL BREAKOUT 03/02/2012.

15 MONTHS CONSOLIDATION COMPLETED.

Finally it has happened; the market after moving in a Falling Channel for more than 15 months, gave the much awaited breakout. In the wake of this Bullish breakout, the entire fall of the last 15 months seems to be a consolidation of the entire upmove from the low of Sensex 7697 to a high of 21108 and Nifty from 2252 to 6338. Long term trend has reversed as the market has completed a bullish consolidation pattern in the form of Falling Channel on the higher timeframe chart. Besides this, the indices have managed to give a close above the long term average of 200dma. In the higher timeframe chart, a higher top higher bottom formation is yet to happen. First step in that direction will be a crossover of Sensex 17908 and Nifty 5399 which will signal a higher top formation on the weekly charts.

TECHNICALLY SPEAKING. 

Sensex opened the week at 17138, made a high of 17630, low of 16828 and closed the week at 17604. Thus it registered a weekly gain of 371 points. At the same time the Nifty opened the week at 5163, made a high of 5334, low of 5076 and closed the week at 5325. Thus the Nifty went up by 121 points on a weekly basis.

When Nifty closed above the level of 5217 on Wednesday, the bearish impact of Hanging Man pattern was nullified. From then the market went from strength to strength and formed a big Bullish White body candle on the weekly charts. This is the fifth consecutive week where a big white body candle was registered. On the daily charts too, there was a big White body candle formed which is inline with the bullishness seen in the market. Hence candlestick patterns point towards a likelihood of continuation of bullish scenario.

Since May 2011, the market has continuously been below the long term average i.e. the 200dma and as a result the long term trend remained down. But this week the indices have managed to overcome the 200dma (Sensex – 17279 and Nifty – 5190) which signals that the long term trend has turned Bullish. Medium and Short term Trend have already reversed as the Sensex and Nifty continue to stay above their medium term average of 50dma (Sensex – 16227 and Nifty – 4874) and short term average of 20dma (Sensex – 16656 and Nifty – 5020). As a result, the trend in the Short term timeframe, Medium term timeframe and Long term timeframe, have turned Bullish.

After consolidating in a Falling Channel pattern for more than 15 months, both Sensex and Nifty gave a Bullish breakout this week, when it closed above Sensex 17355 and Nifty 5254. The target as per this formation is Sensex 20383 and Nifty 6148.

On the daily charts, both Sensex and Nifty are above their previous minor tops at Sensex 17003 and Nifty 5099. Thus the target as per the Golden Ratio of the fall from Sensex 17003 to 15135 and Nifty 5099 to 4531, comes in at Sensex 18157 and Nifty 5445. Also the 50% Retracement of the entire fall from Sensex 21108 to 15135 and Nifty from 6338 to 4531, falls at Sensex 18122 and Nifty 5435. As a result we have a confluence zone being formed between Sensex 18122 – 18157 and Nifty 5435 – 5445 which will act as a strong Resistance zone.

MACD and ROC are in positive territory and continue with their Buy signals. RSI (73) and Stochastic Oscillator (%K at 97) have been overbought for sometime now. The Stochastic Oscillator has been overbought for nearly a month. Directional Indicators continue in Buy mode as +DI continues to remain above –DI. ADX has moved higher at 26, suggesting uptrend is getting stronger. Bollinger band has been in a Buy mode for almost two weeks now. MFI has moved higher at 88 and is in overbought territory for more than a week. OBV continuous in buy mode as it makes a higher top higher bottom formation. Majority of Oscillators, even though in Buy mode, are overbought.

Nifty O.I. PCR has improved and is around 1.64. Highest Open Interest buildup is seen at 5000 Put. 5300 strike Call has seen slight reduction in Open Interest, while 5500 strike Call has seen a strong addition in Open Interest. Hence one can expect Nifty to move upto 5500 on the higher side. 

Trendline Resistance for the Sensex is at 18099. Trendline Support for the Sensex is at 17423.

Trendline Resistance for the Nifty is at 5433. Trendline Support for the Nifty falls at 5253.

For the week ahead, Sensex will find Support at 17295-16989-16668 and will find Resistance at 17944-18327-18679.

For the week ahead, Nifty will find Support at 5211-5099-4985 and will find Resistance at 5434-5532-5645.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4985

5099

5211

5325

5434

5532

5645

Sensex

16668

16989

17295

17604

17944

18327

18679

LAST WEEKS RECOMMENDATIONS:

All stocks with the exception of BGR Energy and Praj Ind reached their targets. The star performer was Jindal South West which went up by an amazing 23%!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Bhushan

349

357

365

500

Rs.8,000

PrajInd

90

94

92

4000

Rs.8,000

BGREngy

246

254

246

500

Rs. -

HindZinc

133

142

144

2000

Rs.22,000

JindalSW

542

572

667

500

Rs.62,500

Total

Rs.1,00,500

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Kotak

518

508

532

547

Buy OFSS

2099

2052

2173

2250

Buy BemL

548

538

561

575

Buy NaLco

63

61

67

71

Buy Pantaloon

175

171

181

188

WATCH OUT FOR:

Kotak Mah Bank

OFSS

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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