Archives : BEAR GRIP ON THE MARKET - 22/03/2013.

BEAR GRIP ON THE MARKET – 22/03/2013.

200DMA TO BE TESTED.

Volatility increased as the key short term support of 5791 was breached. As expected a sharp bear move followed which took the market lower upto Nifty 5631 and in the process a Bearish Head and Shoulders pattern got completed. In the near term, the long term support of 200dma (Sensex 18526 and Nifty 5618) is likely to be tested and provide some support to the market. A breach of this support will not only change the long term trend of the market to bearish but also open the gates for Nifty to reach levels of 5204.

 

 


BEAR GRIP ON THE MARKET – 22/03/2013.

200DMA TO BE TESTED.

Volatility increased as the key short term support of 5791 was breached. As expected a sharp bear move followed which took the market lower upto Nifty 5631 and in the process a Bearish Head and Shoulders pattern got completed. In the near term, the long term support of 200dma (Sensex 18526 and Nifty 5618) is likely to be tested and provide some support to the market. A breach of this support will not only change the long term trend of the market to bearish but also open the gates for Nifty to reach levels of 5204.

TECHNICALLY SPEAKING. 

Sensex opened the week at 19282, made a high of 19378, low of 18669 and closed the week at 18735. Thus it registered a big weekly loss of 692 points. At the same time the Nifty opened the week at 5816, made a high of 5863, low of 5631 and closed the week at 5651. Thus the Nifty went down by 221 points on a weekly basis.

Both Sensex and Nifty have completed a small black body Spinning Top formation on the daily charts on Friday. It is a neutral formation coming after a strong down move and is signaling that probably the downtrend is in doubt. On the weekly charts both Sensex and Nifty have formed a big black body candle which is in line with the downtrend. Thus the candlesticks are neutral on daily charts whereas they continue to show bearishness in the weekly charts.

The short term average of 20dma (Sensex – 19196 and Nifty – 5800) was conveniently breached this week. The indices were already below the medium term average of 50dma (Sensex – 19533 and Nifty – 5909). Still, the indices continue to remain above the long term average of 200dma (Sensex – 18526 and Nifty – 5618). Thus the trend in the short term and medium term is bearish, while that in the long term timeframe continues to remain bullish.

Both the indices had bounced back from Sensex 18255 and Nifty 5548 forming intermittent lows, which are 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.

If we consider the entire rally from low of Sensex 15135 and Nifty 4531 to a high of Sensex 20203 and Nifty 6111, then the retracement levels for the Sensex will be 18267-17669-17071 and 5507-5321-5134 for the Nifty.

Thus the 38.2% Retracement level i.e. Sensex 18267 and Nifty 5507 is very close to starting point of the Bullish Rising Gap (Sensex 18284 and Nifty 5526) and their intermittent lows (Sensex 18255 and Nifty 5548), thus forming a strong support zone between Sensex 18284 - 18255 and Nifty 5548 - 5507.

Both Sensex and Nifty had completed a Bearish Head and Shoulders pattern three weeks back, the targets for which were Sensex 18519 and Nifty 5519. But this week, both the indices have formed a larger Bearish Head and Shoulders pattern and the targets according to this pattern are Sensex 17250 and Nifty 5204. This is secondary pattern which has evolved from the smaller primary Head and Shoulders pattern. If Sensex were to close above 19754 and Nifty above 5971, then both Bearish Head and Shoulders patterns will stand negated.

On the weekly charts, both the indices 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 continues with its Sell signal besides being negative. ROC too is negative and continues with its Sell signal. RSI (33) too continues to show increase in bearish momentum. Stochastic Oscillator continues in Sell mode as %K (6) is below %D, besides being oversold. MFI (50) is just hovering at the centerline and hence is in buy mode. ADX has moved higher to 24, suggesting that the current down trend is now slowly gaining strength. The Directional Indicators are in a Sell mode +DI continues to be below -DI. OBV has gone below the previous low and hence has signaled a Sell, besides making a lower top lower bottom formation. Majority of the Oscillators are suggesting bearishness to continue in the short term.

The Nifty O.I. PCR has reduced to a low level of 0.79. For the April series, highest Open interest build up continues at 5700 Put and 5900 Call. But Friday saw some reduction in Open Interest of 5700 Put. There was a strong addition to the Open Interest of 5600 Put. This suggests that the market expects a trading range for the Nifty with support at 5600 and resistance around 5900 levels. The O.I. PCR has reduced to a very low level of 0.79 which happens when the market falls sharply. The Put writers suffer because of the sharp fall and as a result the ratio reduces. The market will witness a bounce back when O.I. PCR bottoms out around 0.60 to 0.75.

Trendline Support for the Sensex is at 17689. Trendline Resistance for the Sensex is at 19594.

Trendline Support for the Nifty is at 5332. Trendline Resistance for the Nifty falls at 5922.

For the week ahead, Sensex will find Support at 18402-18062-17677 and will find Resistance at 19082-19411-19754.

For the week ahead, Nifty will find Support at 5548-5447-5332 and will find Resistance at 5757-5863-5971.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5332

5447

5548

5651

5757

5863

5971

Sensex

17677

18062

18402

18735

19082

19411

19754

LAST WEEKS RECOMMENDATIONS:

It was an ordinary week as majority of the stocks failed to reach their targets except for Lupin and Siemens. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy Lupin

609

622

633

500

Rs.12,000

Siemens

574

594

594

500

Rs.10,000

Buy Dabur

137

141

140

2000

Rs. 6,000

Buy Polaris

122

126

122

2000

Rs. -

Satyam

129

134

131

2000

Rs. 4,000

Total

Rs.32,000

THIS WEEKS RECOMMENDATIONS: 

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell ICICI

1028

1049

996

963

Sell IOC

290

297

281

272

Sell HDFCBnk

605

615

591

576

Sell TataComm

213

218

206

198

Sell TataMtrDvr

155

158

150

144

WATCH OUT FOR:

ICICI 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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