Archives : RBI PLAYS SPOIL-SPORT - 03/05/2013.

RBI PLAYS SPOIL-SPORT – 03/05/2013.

SENSEX NEEDS TO STAY ABOVE 19754.

Sensex seems to be playing catch up to the Nifty as last week the Nifty closed above the 61.8% Retracement level whereas the Sensex was still below it; this week the Nifty closed above the critical level of 5971, whereas the Sensex could not close above the corresponding level of 19754. But this week both the indices have managed to close above the 61.8% Retracement level. On Friday, the stage was set for the Nifty to climb higher but once again RBI played spoilsport. It cut the Repo rate by 25bps and left the CRR unchanged, which was on expected lines, but the regressive thinking (limited room for Interest Rate easing) of the RBI governor let the market down. Once again we emphasize that the market needs to stay above the important levels of Sensex 19754 and Nifty 5971, to negate the Bearish Head and Shoulders pattern.

 


RBI PLAYS SPOIL-SPORT – 03/05/2013.

SENSEX NEEDS TO STAY ABOVE 19754.

Sensex seems to be playing catch up to the Nifty as last week the Nifty closed above the 61.8% Retracement level whereas the Sensex was still below it; this week the Nifty closed above the critical level of 5971, whereas the Sensex could not close above the corresponding level of 19754. But this week both the indices have managed to close above the 61.8% Retracement level. On Friday, the stage was set for the Nifty to climb higher but once again RBI played spoilsport. It cut the Repo rate by 25bps and left the CRR unchanged, which was on expected lines, but the regressive thinking (limited room for Interest Rate easing) of the RBI governor let the market down. Once again we emphasize that the market needs to stay above the important levels of Sensex 19754 and Nifty 5971, to negate the Bearish Head and Shoulders pattern.

TECHNICALLY SPEAKING. 

Sensex opened the week at 19306, made a high of 19792, low of 19284 and closed the week at 19575. Thus it registered a weekly gain of 289 points. At the same time the Nifty opened the week at 5877, made a high of 6019, low of 5867 and closed the week at 5944. Thus the Nifty went up by 73 points on a weekly basis.

Just like previous week, both the indices again made an Opening White Body Marubuzo on the weekly charts, such that the shadow is almost same as the body. On the daily charts, again like the previous week, the last two days have formed a Bearish Harami. This is a Bearish Reversal pattern which requires a confirmation on the next day. Hence only if we get a confirmation in the form of a bearish candle on Monday, will we say that there is a Bearish Reversal in the short term timeframe.

The Bullish Rising Gap between Sensex 18284-18062 and Nifty 5526-5447 was tested many times in the last month and the gap has proved to be a strong support for the market. In fact this gap has consistently provided support to the market. This gap holds more significance because a breach of this gap will signal the end of the current rally.

The Pull-back rally started last week after both Sensex and Nifty again took support at the Bullish Rising Gap as mentioned above. The levels for the Pull-back rally were 18930-19173-19416 for the Sensex and 5719-5794-5869 for the Nifty. This week both Sensex and Nifty have managed to close above their respective 61.8% Retracement level (Sensex 19416 and Nifty 5869) and hence we can say that the correction is over.

This week both the indices stayed well above the short term average of 20dma (Sensex – 18886 and Nifty – 5724), medium term average of 50dma (Sensex – 19076 and Nifty – 5767) and even the long term average of 200dma (Sensex – 18744 and Nifty – 5685). Thus the trend in the short term, medium term and the long term timeframe remains upwards.

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.

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 stay above 19754 and Nifty above 5971, then the Bearish Head and Shoulders pattern will stand negated.

MACD and ROC continue with their Buy signals besides being positive. RSI (62) indicates that the bullish momentum is high. Stochastic Oscillator has just given a Sell signal as %K (91) has gone below %D. MFI (79) is just playing in and around overbought zone. ADX has moved slightly higher to 26, suggesting that the current trend is regaining some strength. The Directional Indicators continue with its Buy signal as +DI maintains itself above -DI. OBV is in Buy mode and has been making higher top and higher bottom formation. Bollinger Band continues with Buy signal given in previous week. Thus, majority of the Oscillators point towards continuation of bullishness in the short term.

The Nifty O.I. PCR is at a reasonable level of 1.24. For the current series, highest Open interest build up is seen at 5700 Put and 6000 Call. This suggests that the market expects a trading range for the Nifty with support coming in at 5700 and resistance around 6000 levels. Lot of Put writing was seen at the strike of 5800 on Friday, which suggests an immediate support at that level.

Trendline Support for the Sensex is at 19235. Trendline Resistance for the Sensex is at 20100.

Trendline Support for the Nifty is at 5800. Trendline Resistance for the Nifty falls at 6085.

For the week ahead, Sensex will find Support at 19264-18950-18616 and will find Resistance at 19884-20217-20538.

For the week ahead, Nifty will find Support at 5853-5754-5663 and will find Resistance at 6037-6138-6223.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5663

5754

5853

5944

6037

6138

6223

Sensex

18616

18950

19264

19575

19884

20217

20538

LAST WEEKS RECOMMENDATIONS:

Majority of the recommendations did well, but the Star performer of the week was OFSS which went up by around 5%. 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy Maruti

1673

1737

1710

250

Rs. 9,250

Buy L&T

1540

1572

1584

250

Rs.11,000

BajAut

1895

1935

1934

125

Rs. 4,875

Buy Cipla

409

417

414

1000

Rs. 5,000

Buy OFSS

2557

2685

2694

125

Rs.17,125

Total

Rs.47,250

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy TataStL

311

305

320

330

Buy AdaniPrts

155

151

162

169

Buy Bata

771

760

789

808

Buy Crompton

94

92

98

102

Buy Sterlite

96

94

99

103

WATCH OUT FOR:

Adani Ports

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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