Archives : CONSOLIDATION BEFORE RALLY - 10/02/2012.

CONSOLIDATION BEFORE RALLY – 10/02/2012.

RESISTANCE ZONE 5435 – 5450 HALTS RALLY.

After witnessing a non-stop parabolic rise in the indices, the market finally seems to have decided to take a breather, after testing the strong Resistance zone as mentioned last week (Nifty 5435-5450). Interestingly Nifty went above the previous intermittent high of 5399 for a while, but the Sensex failed to cross that level of 17908. Even thought the market has paused for a while, it no way means a reversal of any sort. The consolidation is very much necessary for further upward rally to continue and the market may consolidate by moving sideways or correcting the immediate rise from Sensex 15135 and Nifty 4531. A retest of the crucial 200dma will be healthy for the market. The trend, in the meantime, continues to remain up in short term, medium term and long term timeframe.

 

 


CONSOLIDATION BEFORE RALLY – 10/02/2012.

RESISTANCE ZONE 5435 – 5450 HALTS RALLY.

After witnessing a non-stop parabolic rise in the indices, the market finally seems to have decided to take a breather, after testing the strong Resistance zone as mentioned last week (Nifty 5435-5450). Interestingly Nifty went above the previous intermittent high of 5399 for a while, but the Sensex failed to cross that level of 17908. Even thought the market has paused for a while, it no way means a reversal of any sort. The consolidation is very much necessary for further upward rally to continue and the market may consolidate by moving sideways or correcting the immediate rise from Sensex 15135 and Nifty 4531. A retest of the crucial 200dma will be healthy for the market. The trend, in the meantime, continues to remain up in short term, medium term and long term timeframe.

TECHNICALLY SPEAKING. 

Sensex opened the week at 17741, made a high of 17890, low of 17579 and closed the week at 17748. Thus it registered a weekly gain of 144 points. At the same time the Nifty opened the week at 5379, made a high of 5427, low of 5322 and closed the week at 5381. Thus the Nifty went up by 56 points on a weekly basis.

Candlestick pattern suggests some pause in the current rally as the daily and the weekly charts have bearish candle formations. Both Sensex and Nifty have formed a Bearish Doji on the weekly charts. This pattern requires confirmation and a black body candle in the next week will confirm bearish reversal. On the daily charts too, there is a Bearish Harami formation, which is also a bearish reversal pattern. A black body candle on Monday will confirm the reversal. Daily charts also show that a Tweezer top has been formed on both Sensex and Nifty. The bearish pattern will stand negated only if the Sensex and Nifty close above 17890 and 5427 respectively on weekly charts.

This week, the indices have managed to stay above the crucial level of 200dma (Sensex – 17835 and Nifty – 5178) which signals that the long term trend continues to be Bullish. Medium and Short term Trend are Bullish as the Sensex and Nifty continue to stay above their medium term average of 50dma (Sensex – 16390 and Nifty – 4928) and short term average of 20dma (Sensex – 17085 and Nifty – 5162). As a result, the trend in the Short term timeframe, Medium term timeframe and Long term timeframe, continue to be 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 5450. 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. Also the 61.8% Retracement of the intermediate fall from Sensex 19811 to 15135 and Nifty 5944 to 4531, falls at Sensex 18025 and Nifty 5404. As a result we have a confluence zone being formed between Sensex 18025 – 18157 and Nifty 5404 – 5450 which is acting as a strong Resistance zone. The market has just stopped at the above mentioned Resistance zone.

Since there is a Bearish Candlestick formation on the daily and weekly charts, besides the fact that the market has reached a potential reversal zone; we take the liberty of considering the high registered on Friday as an intermittent top. If the market corrects a bit then the correction levels will have to be of the current rise from Sensex 15135 to 17890 and Nifty from 4531 to 5427 and those levels are 16838 – 16512 – 16187 for the Sensex and 5085 – 4979 – 4873 for the Nifty. Interestingly intermittent rally low for the Sensex is at 16828 and Nifty 5076. Thus Sensex will have a strong Support zone between 16838 – 16828 and Nifty 5076 – 5085.

MACD and ROC are in positive territory and continue with their Buy signals. RSI (71) and Stochastic Oscillator (%K at 91) have been overbought for sometime now. The Stochastic Oscillator has been overbought for over a month. Directional Indicators continue in Buy mode as +DI continues to remain above –DI. ADX has moved further up at 31, suggesting uptrend has got stronger. Bollinger band has been in a Buy mode for almost last three weeks now. MFI has moved lower from overbought zone and is at 78, due to profit booking. OBV continuous in buy mode as it makes a higher top higher bottom formation. Majority of Oscillators, even though in Buy mode, are overbought and some pull-back can be expected.

Nifty O.I. PCR is around 1.67 suggesting bullish strength. Highest Open Interest buildup is seen at 5500 Call. 5200 strike Put has seen strong addition in Open Interest. Hence one can expect Nifty to move between 5200 on the lower side and 5500 on the higher side. 

Trendline Resistance for the Sensex is at 17952. Trendline Support for the Sensex is at 17375.

Trendline Resistance for the Nifty is at 5457. Trendline Support for the Nifty falls at 5237.

For the week ahead, Sensex will find Support at 17469-17122-16788 and will find Resistance at 18131-18542-18944.

For the week ahead, Nifty will find Support at 5276-5177-5064 and will find Resistance at 5496-5608-5721.

INDEX LEVELS:  

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5064

5177

5276

5381

5496

5608

5721

Sensex

16788

17122

17469

17748

18131

18542

18944

LAST WEEKS RECOMMENDATIONS:

All the recommendations easily reached their targets with Nalco just missing by a whisker. However the Star Performer for the week was Pantaloon Retail which went by an astonishing 15%!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy Kotak

518

547

559

500

Rs.20,500

Buy OFSS

2099

2173

2207

125

Rs.13,500

Buy BeML

548

575

591

500

Rs. 21,500

Buy NaLco

63

67

66

4000

Rs.12,000

Pantaloon

175

188

201

1000

Rs.26,000

Total

Rs.93,500

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy NTPC

180

177

185

190

Buy SunTV

340

333

351

362

Buy LiCHsg

275

270

283

292

Buy IndusInd

319

312

329

340

Buy Crompton

151

148

156

162

WATCH OUT FOR:

NTPC

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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