Archives : KEY SUPPORTS BREACHED - 08/02/2013.

KEY SUPPORTS BREACHED – 08/02/2013.

CRITICAL TRENDLINE BREACHED.

The bearishness gained momentum on Friday when key support levels were breached as the Nifty went below the critical level of 5900. A critical long term Trendline (starting from low of Sensex 15748 and Nifty 4770) which has been holding the market for the past nine months, was breached on Friday. In the process, both the short term and medium term trend has turned bearish. Now the Correction levels for the Sensex stands at 19459-19229-18999 and for the Nifty 5896-5830-5763.

 


KEY SUPPORTS BREACHED – 08/02/2013.

CRITICAL TRENDLINE BREACHED.

The bearishness gained momentum on Friday when key support levels were breached as the Nifty went below the critical level of 5900. A critical long term Trendline (starting from low of Sensex 15748 and Nifty 4770) which has been holding the market for the past nine months, was breached on Friday. In the process, both the short term and medium term trend has turned bearish. Now the Correction levels for the Sensex stands at 19459-19229-18999 and for the Nifty 5896-5830-5763.

TECHNICALLY SPEAKING. 

Sensex opened the week at 19860, made a high of 19902, low of 19414 and closed the week at 19484. Thus it registered a weekly loss of 297 points. At the same time the Nifty opened the week at 6025, made a high of 6038, low of 5883 and closed the week at 5903. Thus the Nifty went down by 95 points on a weekly basis.

Both Sensex and Nifty have formed a big black body candle on weekly charts. This follows previous week’s big black body candle. A strong bearish formation will be completed if another big black body candle forms next week. On the daily charts a black body candle has been formed in accordance with the downtrend. Hence both daily and weekly candlestick patterns points towards short term bearishness.

This week both the indices have managed to close below the medium term average of 50dma (Sensex – 19633 and Nifty – 5959) and hence the medium term trend has turned bearish. Already last week, both the indices went below the short term average of 20dma (Sensex – 19887 and Nifty – 6021) and as a result short term trend continues to be bearish. However, the indices continue to remain above the long term average of 200dma (Sensex – 18101 and Nifty – 5491). Thus the trend in the short term and medium term timeframe has turned down, while that in the long term timeframes continues to remain bullish.

A key long term trendline starting from low of Sensex 15748 and Nifty 4770, has been breached on Friday. This trendline has been successfully supporting the market for more than nine months.

Currently the market is in correction mode and if we consider the rally from Sensex 18255 to 20203 and Nifty 5548 to 6111, then the minimum retracement levels for the Sensex will be 19459-19229-18999 and 5896-5830-5763 for the Nifty.

The 50% Retracement level of both the indices is likely to provide strong support as that level is in very close vicinity of previous intermittent low (Sensex 19149 and Nifty 5823) and the 100dma (Sensex – 19148 and Nifty – 5815). Thus zone between Sensex 19229-19148 and Nifty 5830-5815 is likely to act as strong Support zone.

A short term Bearish Rising Wedge pattern got completed last week and the target was at Sensex 19551 and Nifty 5903, which has been achieved on Friday.

When the Sensex closed above 19612 & Nifty above 5965, a Flag formation on the weekly charts got completed. The Flag pole started from a low of Sensex 18255 and Nifty 5548 and the targets as per this formation are Sensex 20969 and Nifty 6382. The targets will be achieved as long as Sensex remains above 19149 and Nifty above 5823.

Both the indices had bounced back from Sensex 18255 and Nifty 5548 which is within the Bullish Rising Gap between Sensex 18062-18284 and Nifty 5447-5526. This gap has acted as a strong support for the market even before as the Sensex had bounced back from a low 18291 and Nifty 5534. This gap holds more significance because a breach of this gap will signal the end of the current rally.

On the daily charts, both Sensex and Nifty had formed a Bullish Diamond pattern and the target as per this formation was Sensex 20171 and Nifty 6192. The target has been achieved in Sensex. Also market had tested the Falling Channel Top and bounced back from there. Hence the overall long term target for Falling Channel pattern breakout remains intact. The targets as per this formation are Sensex 20383 and Nifty 6148.

On the weekly charts, both the indices have been moving higher in Flag formations and it had previously completed a Flag formation and the target according to the pattern comes in at Sensex 21024 and Nifty 6415. The targets will be achieved as long as the Sensex remains above 18255 and Nifty 5548. If we take the Saucer formation which is due to the fall from Sensex 18523 to 15748 and Nifty 5629 to 4770, then the target comes in at Sensex 21298 and Nifty 6488. Hence we have a Target zone of 21024 - 21298 on the Sensex and 6415 - 6488 on the Nifty.

MACD and ROC both are negative and continues in Sell mode. The RSI at 37 continues to fall and is well below the equilibrium line, indicating an increase in bearish momentum. Stochastic Oscillator is in oversold zone and has just given a Buy signal as %K (6) has moved above %D. MFI has moved sharply below the centerline at 21, which suggest money flowing out of the market. ADX has moved lower and is currently at 28, suggesting a reduction in the strength of the current trend. The Directional Indicators are in Sell mode as +DI continues to remain below -DI. OBV has gone below the previous low and continues in its Sell mode. A fresh Sell signal was generated in Bollinger Band when prices closed below the lower band.

The Nifty O.I. PCR is lower at 1.07. Highest Open interest build up is at 5900 Put and 6100 Call. On Friday when the indices breached the 5900 level, Put writing activity shifted to 5800 strike and 5700 strike. This suggests that the market expects a trading range for the Nifty with support coming in at 5700 and resistance around 6100 levels.

Trendline Support for the Sensex is at 19186.

Trendline Support for the Nifty is at 5832.

For the week ahead, Sensex will find Support at 19186-18873-18589 and will find Resistance at 19767-20036-20267.

For the week ahead, Nifty will find Support at 5823-5736-5649 and will find Resistance at 5990-6069-6151.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5649

5736

5823

5903

5990

6069

6151

Sensex

18589

18873

19186

19484

19767

20036

20267

LAST WEEKS RECOMMENDATIONS:

PAIR NO.

STOCK

Rec.price

Tgt

 Reached 

Lot size

Profit

1

Buy

McDowell

1865

1918

1947

250

Rs.20,500

Sell

Bharti

329

321

316

1000

Rs.13,000

2

Buy

BPCL

422

435

429

1000

Rs. 7,000

Sell

PTC

74

71

69

4000

Rs.20,000

3

Buy

SunTV

479

489

494

1000

Rs.15,000

Sell

DenaBk

107

104

102

4000

Rs.20,000

Profit

Rs.95,500

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell BajajAut

2046

2071

2009

1970

Sell DrReddy

1855

1872

1821

1786

Sell Cipla

380

385

372

363

Sell KtkBnk

145

149

139

132

Sell RPower

85

87

82

78

WATCH OUT FOR:

Karnataka Bank

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