Archives : PULL-BACK OR REVERSAL - 18/04/2013.

PULL-BACK OR REVERSAL? – 18/04/2013.

BULLISH RISING GAP STILL HOLDS.

As expected for the second week running, both Sensex and Nifty took support at the critical long term Bullish Upward Gap between Sensex 18284-18062 and Nifty 5526-5447. But now the million dollar question is whether the current rally is a mere Pull-back or a Reversal. The sharp upward rally witnessed in the previous week can still be attributed as a Pull-back rally and not a Reversal of Trend yet. Only if the Sensex stays above the level of 19416 and Nifty above 5869; can we say that this is a Reversal of Trend. Also the Bearish Head and Shoulders pattern is still in force and that pattern can be negated only if the Sensex closes above 19754 and Nifty above 5971.

   


PULL-BACK OR REVERSAL? – 18/04/2013.

BULLISH RISING GAP STILL HOLDS.

As expected for the second week running, both Sensex and Nifty took support at the critical long term Bullish Upward Gap between Sensex 18284-18062 and Nifty 5526-5447. But now the million dollar question is whether the current rally is a mere Pull-back or a Reversal. The sharp upward rally witnessed in the previous week can still be attributed as a Pull-back rally and not a Reversal of Trend yet. Only if the Sensex stays above the level of 19416 and Nifty above 5869; can we say that this is a Reversal of Trend. Also the Bearish Head and Shoulders pattern is still in force and that pattern can be negated only if the Sensex closes above 19754 and Nifty above 5971.

TECHNICALLY SPEAKING. 

Sensex opened the week at 18196, made a high of 19058, low of 18144 and closed the week at 19016. Thus it registered a strong weekly gain of 774 points. At the same time the Nifty opened the week at 5508, made a high of 5794, low of 5500 and closed the week at 5783. Thus the Nifty went up by 255 points on a weekly basis.

Both the indices made a big White Body Marubuzo on the weekly charts. It has also formed a Bullish Engulfing which is a Bullish Reversal pattern, if we consider last two weeks candle formations. As a matter of fact the current weeks white body candle is so big that it completely engulfs last three weeks black body candles. On the daily charts there is an Opening White Body Marubuzo on both Sensex and Nifty, which is again pointing towards more bullishness in the short term.

This week, both the indices again tested and took support at the Bullish Rising Gap between Sensex 18284-18062 and Nifty 5526-5447. This gap has acted as a strong support for the market even before. This gap holds more significance because a breach of this gap will signal the end of the current rally.

The Pull-back rally started this week after both Sensex and Nifty again took support at the Bullish Rising Gap as mentioned above. The levels for the Pull-back rally will be 18930-19173-19416 for the Sensex and 5719-5794-5869 for the Nifty.

This week both the indices were able to conquer the short term average of 20dma (Sensex – 18657 and Nifty – 5633), and even the long term average of 200dma (Sensex – 18666 and Nifty – 5661). Nifty even managed to close above the medium term average of 50dma (Sensex – 19101 and Nifty – 5769) but Sensex has closed below that level. Thus the trend in the short term and the long term timeframe has turned upwards but the medium term trend still remains down atleast for the Sensex.

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.

If we consider the intermittent rally from the low of Sensex 15748 and Nifty 4770 to a high of Sensex 20203 and Nifty 6111, then the relevant correction levels for that will be at Sensex 18501-17976-17450 and 5599-5441-5282 for the Nifty.

On closer inspection we find that the 38.2% Retracement level of the entire rally i.e. Sensex 18267 and Nifty 5507 is very close to starting point of the Bullish Rising Gap (Sensex 18284 and Nifty 5526) and 50% of Intermittent rally i.e. Sensex 17976 and Nifty 5441 is very close to the lower end of the Bullish Gap (Sensex 18062 and Nifty 5447); thus forming a strong support zone between Sensex 18284 - 17976 and Nifty 5526 - 5441. This support zone held true for the second week running.

Both Sensex and Nifty had completed a Bearish Head and Shoulders pattern, the targets for which were Sensex 17250 and Nifty 5204. This is secondary pattern which has evolved from the smaller primary Head and Shoulders pattern. Only if the Sensex were to close above 19754 and Nifty above 5971, then the Bearish Head and Shoulders pattern will stand negated.

MACD has given a Buy signal despite being negative. ROC too is negative and continues with its Sell signal but is moving higher. RSI (54) has given a fresh Buy signal besides showing positive divergence. Stochastic Oscillator is in Buy mode as %K (74) is above %D. MFI (59) is under Buy mode and also showing a positive divergence which signals money flowing into the market. ADX has moved lower to 24, suggesting that the current trend has lost lot some of its strength. The Directional Indicators have given a Buy signal just two days back as +DI has gone above -DI. OBV continues in Sell mode besides making a lower top lower bottom formation, hence OBV does not confirm with the current upward price movement. Thus, majority of the Oscillators with the exception of OBV have turned positive for the short term.

The Nifty O.I. PCR has increased to 1.37. The value has increased after the O.I.PCR reached oversold levels last week. For the current series, highest Open interest build up is seen at 5600 Put and 5900 Call. This suggests that the market expects a trading range for the Nifty with support at 5600 and resistance around 5900 levels. Lot of Put writing was seen at the strike of 5700 on Thursday, which suggests an immediate support at that level.

Trendline Support for the Sensex is at 17860. Trendline Resistance for the Sensex is at 19340.

Trendline Support for the Nifty is at 5511. Trendline Resistance for the Nifty falls at 5837.

For the week ahead, Sensex will find Support at 18687-18393-18062 and will find Resistance at 19345-19686-20036.

For the week ahead, Nifty will find Support at 5679-5583-5477 and will find Resistance at 5863-5971-6068.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5477

5583

5679

5783

5863

5971

6068

Sensex

18062

18393

18687

19016

19345

19686

20036

LAST WEEKS RECOMMENDATIONS:

Majority of the recommendations did well, but the Star performers of the week were Karnataka Bank and RPower which went up by more than 9% each!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

HDFCBnK

643

672

675

500

Rs.16,000

KTKBnk

135

145

148

4000

Rs.52,000

RPower

66

70

72

4000

Rs.24,000

Hindalco

91

95

94

2000

Rs. 6,000

UcoBnk

60

63

64

4000

Rs.16,000

Total

Rs.1,14,000

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy FinTech

754

734

781

809

Buy ReLCap

339

333

348

358

Buy UnionBnk

236

231

243

251

Buy DenaBnk

94

92

98

102

Buy Bhel

185

182

190

195

WATCH OUT FOR:

Dena 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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