Archives : QUITE CONSOLIDATION - 22/06/2012.

QUIET CONSOLIDATION – 22/06/2012.

READY FOR THE NEXT STEP FORWARD.

The week started with disappointment with the RBI keeping the interest rates unchanged. This was accompanied by the disappointments on the European front as well as the falling Rupee. One would have expected the market to give in some of the earlier gains of two weeks, but that was not to be. The entire week was spent consolidating in the trading range of Monday’s candle. This sideways consolidation points to the fact that the market has digested the disappointments on the news front quite well and is ready to take the next step forward.

CLOSE ABOVE NIFTY 5200 VITAL.

On a very short term timeframe a confluence of resistance is seen between Sensex 17109-17136 and Nifty 5190-5200. These resistances are a result of the 50% of the Pull-back levels, current weeks high and the 100dma. A close above this resistance zone will end consolidation and resume the short term uptrend. On the other hand, the low for the indices this week has resulted in Tweezer formation, which should provide some support. Thus a close below Sensex 16636 and Nifty 5041 will result in a reversal in the short term timeframe.

  


QUIET CONSOLIDATION – 22/06/2012.

READY FOR THE NEXT STEP FORWARD.

The week started with disappointment with the RBI keeping the interest rates unchanged. This was accompanied by the disappointments on the European front as well as the falling Rupee. One would have expected the market to give in some of the earlier gains of two weeks, but that was not to be. The entire week was spent consolidating in the trading range of Monday’s candle. This sideways consolidation points to the fact that the market has digested the disappointments on the news front quite well and is ready to take the next step forward.

CLOSE ABOVE NIFTY 5200 VITAL.

On a very short term timeframe a confluence of resistance is seen between Sensex 17109-17136 and Nifty 5190-5200. These resistances are a result of the 50% of the Pull-back levels, current weeks high and the 100dma. A close above this resistance zone will end consolidation and resume the short term uptrend. On the other hand, the low for the indices this week has resulted in Tweezer formation, which should provide some support. Thus a close below Sensex 16636 and Nifty 5041 will result in a reversal in the short term timeframe.

TECHNICALLY SPEAKING. 

Sensex opened the week at 17039, made a high of 17109, low of 16636 and closed the week at 16972. Thus it registered a small weekly gain of 23 points. At the same time the Nifty opened the week at 5174, made a high of 5190, low of 5041 and closed the week at 5146. Thus the Nifty went up by just 7 points on a weekly basis.

Both Sensex and Nifty formed a big black body candle on Monday and the entire week was spent in the trading range of this big candle. This has resulted in a short term trading range being developed between Sensex 17109 - 16636 and Nifty 5190 - 5041. A short term direction will be taken depending upon whether the breakout is bullish or bearish. On the weekly charts there is a small black candle formation resembling a Spinning Top formation which is a neutral formation with a long lower shadow which shows buying at lower levels.

After making an intermittent low of Sensex 15748 and Nifty 4770, the markets are witnessing a strong pull-back. The Pull-back or Retracement levels are at 16808-17136-17463 for the Sensex and 5098-5200-5301 for the Nifty.

Both Sensex and Nifty are above the long term average of 200dma (Sensex – 16803 and Nifty – 5074). Also the indices are above the medium term average of 50dma (Sensex – 16680 and Nifty – 5058) and the short term average of 20dma (Sensex – 16584 and Nifty – 5030). As a result, the trend in the Long term timeframe, Medium term timeframe and the Short term timeframe are all Bullish.

Both Sensex and Nifty have given a bearish breakout for the Falling Wedge pattern. The target as per this breakout falls at Sensex 15728 and Nifty 4742. But more often than not, a bearish breakout in a Falling Wedge is likely to result in the indices moving towards the point from where the rally has started and i.e. Sensex 15135 and Nifty 4531. The lows registered two weeks back (Sensex 15748 and Nifty 4770) are very close to immediate target of the Falling Wedge pattern; hence the immediate target has been achieved. The long term target will stand negated if the Sensex closes above 17432 and Nifty above 5279.

Market has now once again gone above the level of the Falling Channel Top which comes in at Sensex 16284 and Nifty 4922. These levels should now provide Support for the market. The overall bullish long term target for Falling Channel pattern breakout remains intact. The targets as per this formation are Sensex 20383 and Nifty 6148.

There is a strong Resistance formed by the confluence of the 61.8% of the immediate fall (i.e. from Sensex 18523 to 15748), 38.2% of the entire fall (Sensex 21108 to 15135) and the immediate previous top (17432). Thus the Sensex has a strong Resistance zone of 17417–17463. The confluence zone for the Nifty has been formed by the 61.8% of the immediate fall (Nifty from 5629 to 4770) and the previous intermittent top (5279). Thus the Nifty has a strong Resistance zone at 5279-5301.

MACD and ROC both continue in their Buy mode and are in positive territory. RSI at 58 suggests bullish momentum is likely to continue. Stochastic Oscillator has given a Buy as %K is above %D, but (%K is at 88) that is in overbought territory. MFI (72) continues with its Buy mode and so does the Directional Indicators as +DI is above –DI. ADX has fallen to 18, which suggests that the downtrend has lost its strength completely. OBV is already making higher top, higher bottom formation. Bollinger Band had signaled a Buy and it continues in its Buy mode.

The Nifty O.I. PCR is at a high level of 1.82 but it still has room for more upside. The confidence of Put writers has increased and they are having a field day. For the July series, highest open interest buildup is seen at 5000 Put and 5200 Call. Besides this, significant Put writing has been witnessed at the strike of 4800. Also 5300 Call has added significant open interest. Overall the Nifty is likely to range between 4800 on the lower side to 5300 on the higher side, in the short term. 

Trendline Resistance for the Sensex is at 17833. The Trendline Support for the Sensex is at 16734.

Trendline Resistance for the Nifty is at 5439. The Trendline Support for the Nifty falls at 5036.

For the week ahead, Sensex will find Support at 16636-16295-15974 and will find Resistance at 17258-17570-17890.

For the week ahead, Nifty will find Support at 5041-4944-4837 and will find Resistance at 5243-5342-5428.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4837

4944

5041

5146

5243

5342

5428

Sensex

15974

16295

16636

16972

17258

17570

17890

LAST WEEKS RECOMMENDATIONS:

Except for Tech Mahindra and Bhushan Steel, rest of the recommendations reached their targets. However the Star Performer of the week was Hero Motors which went up by Rs.112. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

TechMah

701

717

712

500

Rs. 5,500

HeroMot

2000

2072

2112

125

Rs.14,000

Grasim

2485

2528

2534

125

Rs. 6,125

Bhushan

460

473

469

500

Rs. 4,500

Buy GMDC

182

187

187

2000

Rs.10,000

Total

Rs.40,125

THIS WEEKS RECOMMENDATIONS:  

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy BomDye

512

504

527

544

Buy Sobha

327

322

335

344

Buy AndhBnk

119

117

123

127

Buy BGREngy

299

295

306

314

Buy RPower

102

100

106

111

WATCH OUT FOR:

Sobha

Andhra Bank

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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