Archives : DUMPLING TOP - 27/07/2012.

DUMPLING TOP – 27/07/2012.

SET UP TURNING BEARISH.

After a number of small body candles forming almost a convex shape, the market opened the week with a gap down and formed an Opening Black body Marubuzo, which resulted in the formation of a Dumpling Top. It is the Japanese counterpart of the Rounding Top formation except that the number of candles can be lesser. The bearish implication of this pattern was visible as the market went lower and breached important support levels. As a result of this formation the long and medium term trend are on the verge of turning bearish whereas the short term trend is already down.

 


DUMPLING TOP – 27/07/2012.

SET UP TURNING BEARISH.

After a number of small body candles forming almost a convex shape, the market opened the week with a gap down and formed an Opening Black body Marubuzo, which resulted in the formation of a Dumpling Top. It is the Japanese counterpart of the Rounding Top formation except that the number of candles can be lesser. The bearish implication of this pattern was visible as the market went lower and breached important support levels. As a result of this formation the long and medium term trend are on the verge of turning bearish whereas the short term trend is already down.

TECHNICALLY SPEAKING. 

Sensex opened the week at 17047, made a high of 17047, low of 16598 and closed the week at 16839. Thus it registered a weekly loss of 319 points. At the same time the Nifty opened the week at 5163, made a high of 5164, low of 5032 and closed the week at 5099. Thus the Nifty went down by 106 points on a weekly basis.

If we consider last two days candlestick pattern then both Sensex and Nifty have formed a Homing Pigeon formation. This will be a Bullish Reversal pattern only if there is a white body formation on Monday. On the weekly charts there is a black body formed with a long lower shadow and no upper shadow. It is quite similar to Opening Black body Marubuzo but the size of the body is small and the lower shadow much bigger. Weekly patterns are in the favour of continuation of bearishness but the daily set up is providing some hope and that will get stronger if a white body candle is formed on Monday.

This week both Sensex and Nifty opened with a gap down and formed another Downward Bearish Gap between Sensex 17129-17047 and Nifty 5197-5164. This comes on the back of existing Downward Bearish Gap between Sensex 17466-17329 and Nifty 5300-5261. If the gap formed this week is termed as Measuring Gap then the target as per this theory works out to be Sensex 16545 and Nifty 5013 which have almost been achieved. Both the Downward Bearish Gaps will now act as strong resistances.

Currently the markets are undergoing correction in short term time frame i.e. correction of the rise from Sensex 15748 to 17361 and Nifty 4770 to 5348. The correction levels are thus placed at 16912-16690-16469 for the Sensex and 5127-5059-4991 for the Nifty.

On a longer time frame both Sensex and Nifty are undergoing a pull-back of the entire fall from Sensex 21108 to 15135 and Nifty from 6338 to 4531. This pull-back will resume once the Sensex closes above 17631 and Nifty 5348. The pull-back levels are 17417-18122-18827 for the Sensex and 5221-5434-5648 for the Nifty.

This week both Sensex and Nifty have tested the long term average of 200dma (Sensex – 16879 and Nifty – 5103) and medium term average of 50dma (Sensex – 16834 and Nifty – 5106) and have closed just below these levels. Indices are already below the short term average of 20dma (Sensex – 17212 and Nifty – 5222) and as a result the trend in the short term timeframe is Bearish. Whereas the indices are hovering near the long term and medium term levels and this week will confirm the long term and medium term trend.

Market is now well above the level of the Falling Channel Top which comes in at Sensex 15993 and Nifty 4835. 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.

MACD continues with its Sell signal and now has turned negative. ROC is negative and continues in Sell mode. RSI has dropped to 43, continues in Sell mode. Stochastic Oscillator has just signaled a Buy as %K (oversold at 12) has moved above %D. MFI is in Sell mode and has moved lower to 22 suggesting money flowing out of the market. The Directional Indicators are in Sell mode as +DI is below –DI. ADX has dropped to 25 which suggest that the trend is getting weaker. OBV has started making lower top, lower bottom formation and hence continues in Sell mode. On Thursday the Bollinger Band gave a fresh Sell when the prices closed below the long Bollinger Band. Thus the oscillators continue to show negative bias in the market.

The Nifty O.I. PCR is low at 1.25. For the August series, highest open interest buildup is seen at 5000 Put and 5500 Call. This suggests an overall range of 5000 on the lower side and 5500 on the higher side for this month. Friday saw a strong build up at 5100 Put which suggests that some support is likely to emerge near the 5100 level of Nifty. 

Trendline Resistance for the Sensex is at 17561. The Trendline Support is at 15959.

Trendline Resistance for the Nifty is at 5322. The Trendline Support falls at 4852.

For the week ahead, Sensex will find Support at 16544-16257-15962 and will find Resistance at 17129-17398-17687.

For the week ahead, Nifty will find Support at 4994-4898-4803 and will find Resistance at 5194-5291-5385.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

4803

4898

4944

5099

5194

5291

5385

Sensex

15962

16257

16544

16839

17129

17398

17687

LAST WEEKS RECOMMENDATIONS:

The market was in corrective mode last week and as a result majority of the recommendations could not reach their targets except for SRF. 

STOCK

Reco. Price

Tgt

Reached

Buy JubFood

1263

1306

1266

Buy Orchid

127

134

129

Buy Havells

606

621

612

Buy ABNuvo

809

831

809

Buy SRF

239

247

250

 THIS WEEKS RECOMMENDATIONS:

This week is expected to be very volatile and hence Pair Strategies are suggested. 

PAIR NO.

STOCK

CMP

SL

TGT - 1

TGT -2

1

Buy

Grasim

2699

2667

2755

2815

Sell

AxisBnk

997

1012

975

952

2

Buy

Sun Pharma

632

621

648

665

Sell

ONGC

277

281

270

262

3

Buy

PowerGrid

114

112

118

123

Sell

DLF

194

198

188

181

WATCH OUT FOR:

Axis Bank

Power Grid

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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