Archives : HOMING PIGEON - 24/05/2013.

HOMING PIGEON – 24/05/2013.

STRONG SUPPORT AT 5853 - 5843.

The market corrected for the first time after five weeks of increase. Nifty has formed a Bearish Engulfing at the top on the weekly charts which is suggestive of a short term reversal in price trend. Sharp corrections have been witnessed in this rally and they are an integral part of any rally. This time the prices are correcting an increase from 5477 to 6229 and the correction levels are 5942-5853-5764. Strong support will be seen around Support zone of 5853-5843. A breach of this support zone will turn the medium term trend down; currently the short term trend has turned bearish.

   


HOMING PIGEON – 24/05/2013.

STRONG SUPPORT AT 5853 - 5843.

The market corrected for the first time after five weeks of increase. Nifty has formed a Bearish Engulfing at the top on the weekly charts which is suggestive of a short term reversal in price trend. Sharp corrections have been witnessed in this rally and they are an integral part of any rally. This time the prices are correcting an increase from 5477 to 6229 and the correction levels are 5942-5853-5764. Strong support will be seen around Support zone of 5853-5843. A breach of this support zone will turn the medium term trend down; currently the short term trend has turned bearish.

TECHNICALLY SPEAKING. 

Sensex opened the week at 20277, made a high of 20443, low of 19568 and closed the week at 19704. Thus it registered a weekly loss of 582 points. At the same time the Nifty opened the week at 6198, made a high of 6229, low of 5936 and closed the week at 5983. Thus the Nifty went down by 204 points on a weekly basis.

This week both the indices have formed a Homing Pigeon on the daily charts. This is a Bullish Reversal pattern but which requires a confirmation. On the weekly charts Nifty has formed a Bearish Engulfing pattern at the top. This signals a price reversal in the short term time frame. On the other hand, Sensex has formed a big black body candle on the weekly charts. Thus weekly candlestick pattern suggests short term bearishness.

This week again both the indices closed below the short term average of 20dma (Sensex – 19891 and Nifty – 6045). However, the market continues to remain above the medium term average of 50dma (Sensex – 19298 and Nifty – 5843) and even the long term average of 200dma (Sensex – 18974 and Nifty – 5756). Thus the trend in the short term timeframe has turned bearish, whereas the trend in the medium term and the long term timeframe remains upwards.

Currently the market is in a correction mode and is correcting the rally from Sensex 18144 to 20443 and Nifty from 5477 to 6229. The respective Correction levels are Sensex 19565-19293-19022 and Nifty 5942-5853-5764.

This week the market fall has halted temporarily after touching the 38.2% Retracement level. But strong support will be seen at the Support zone between Nifty 5853-5843 which is due to the confluence of 50% Retracement level (5853), 50dma (5843) and Bullish Rising Gap (5853-5844). Thus it is a critical support level, if breached then the medium term trend will turn bearish. Corresponding Support Zone for the Sensex is between 19298-19293.

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.

As soon as the market started trading above the levels of Sensex 19754 and Nifty 5971, two things happened. First the Bearish Head and Shoulders pattern got negated. Second the formation which got completed is a cross between a Saucer formation and a V-shape formation. The target for this formation is at Sensex 21364 and Nifty 6465. In the process of achieving the above mentioned targets, both Sensex and Nifty will test the all time highs of Sensex 21206 and Nifty 6357.

MACD has given a Sell signal despite being in positive zone. ROC has turned negative and given a Sell signal. RSI too has given a Sell by moving below the equilibrium line. Stochastic Oscillator remains in Sell mode as %K (25) is below %D. MFI (42) has also gone below the centerline suggesting money flowing out. ADX is still at 31, suggesting the uptrend still has some strength. Interestingly the Directional Indicators have converged and are having the same value which is suggestive of reduction in strength of uptrend. OBV is still in Buy mode and continues to make higher top and higher bottom formation. Buy signal given by Bollinger Bands one month ago, has been negated when the prices closed below the level of 20dma. Thus, majority of the Oscillators points towards bearishness in the short term.

The Nifty O.I. PCR is steady at 1.16. For the next month series, highest Open interest build up is seen at 5900 Put and 6200 Call. This suggests that the market expects a trading range for the Nifty with support coming in at 5900 and resistance around 6200 levels. Lot of Call writing was seen at the strike of 6000 on Friday, which suggests an immediate resistance at that level.

For the week ahead, Sensex will find Support at 19434-19082-18760 and will find Resistance at 19987-20238-20505.

For the week ahead, Nifty will find Support at 5878-5757-5663 and will find Resistance at 6081-6185-6260.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5663

5757

5878

5983

6081

6185

6260

Sensex

18760

19082

19434

19704

19987

20238

20505

WATCH OUT FOR:

Biocon

Finolex

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