Archives : THREE BLACK CROWS - 26/07/2013.

THREE BLACK CROWS – 26/07/2013.

RBI MOVE TRIGGERS PRICE REVERSAL.

With Rupee continuing to be week, RBI announced measures to tighten liquidity and support the Rupee. RBI asked banks to maintain higher average CRR of 99% of the required as against 70% earlier. Market perceived this move as bearish and this lead to a reversal in price. Interestingly after forming a Bearish Three Black Crows on the daily charts, finally the market closed on Friday in the first Upward Gap between Sensex 19785-19723 and Nifty 5889-5879. If the market continues to trade below this gap, then the short term trend will turn bearish. Also the Nifty has given a bearish breakout for Rising Wedge formation, the target for which falls at 5715.

 

 


THREE BLACK CROWS – 26/07/2013.

RBI MOVE TRIGGERS PRICE REVERSAL.

With Rupee continuing to be week, RBI announced measures to tighten liquidity and support the Rupee. RBI asked banks to maintain higher average CRR of 99% of the required as against 70% earlier. Market perceived this move as bearish and this lead to a reversal in price. Interestingly after forming a Bearish Three Black Crows on the daily charts, finally the market closed on Friday in the first Upward Gap between Sensex 19785-19723 and Nifty 5889-5879. If the market continues to trade below this gap, then the short term trend will turn bearish. Also the Nifty has given a bearish breakout for Rising Wedge formation, the target for which falls at 5715.

TECHNICALLY SPEAKING. 

Sensex opened the week at 20096, made a high of 20351, low of 19699 and closed the week at 19748. Thus it registered a weekly loss of 401 points. At the same time the Nifty opened the week at 6009, made a high of 6093, low of 5869 and closed the week at 5886. Thus the Nifty went down by 143 points on a weekly basis.

On the daily charts, both the indices have formed Three Black Crows formation which is a bearish reversal pattern. A big black body candle with a long upper shadow has been formed on the weekly charts. Long upper shadow indicates selling pressure at higher levels. Thus both daily as well as weekly charts suggest bearishness in the near term.

Both the indices fell after making a lower top at Sensex 20351 and Nifty 6093 and have closed the week in the first Upward Gap between Sensex 19785-19723 and Nifty 5889-5879. As per Gap theory, Short term trend will turn bearish if the market stays below this Upward Gap.

There is one more critical gap that both the indices formed three weeks back and i.e. a Bullish Rising gap between Sensex 19093-18925 and Nifty 5749-5699. This gap acted as a support twice as the Sensex and Nifty bounced from just above this gap. This gap marked the beginning of an upward rally and hence it is a Bullish Breakaway gap. Also this gap completed a Bullish Island Reversal pattern on the daily charts. Therefore as per Gap theory, the medium term trend will turn down if this gap is breached.

Both the indices fell after making a lower top at Sensex 20351 and Nifty 6093, hence we are currently undergoing a correction of the immediate rise from Sensex 18467 to 20351 and Nifty 5566 to 6093. The Correction levels are at 19631-19409-19186 for the Sensex and 5892-5829-5767 for the Nifty.

A Bullish Cup and Handle pattern got completed when Sensex closed above 19598 and Nifty above 5904. This is a Bullish Reversal pattern and the target as per this pattern falls at Sensex 20729 and Nifty 6242. This pattern will fail if the Sensex closes below 19147 and Nifty below 5760.

This week both Nifty gave a Rising Wedge bearish breakout and the target as per this breakout falls at Nifty 5715.  Generally this occurs in an uptrend but here it has occurred in the middle of a downtrend and is acting as a bearish continuation pattern, so there is a possibility of it touching Nifty 5566, the point from where the rally started.

This week both the indices have closed below the short term average of 20dma (Sensex – 19751 and Nifty – 5929). Interestingly Nifty has closed below the medium term average of 50dma (Sensex – 19554 and Nifty – 5899) but Sensex is still above that. But both the indices continue to remain above the long term average of 200dma (Sensex – 19320 and Nifty – 5852). Thus the trend in the short term timeframe has turned bearish, but the trend in the long term timeframe continues to remain bullish.

Market has managed to bounce back number of times from above the Bullish Rising Gap between Sensex 18284-18062 and Nifty 5526-5447. This gap was tested many times in the last few months and 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 long term rally.

MACD has given a fresh Sell signal but is still in positive territory. ROC continues with its Buy signal as it remains in the positive zone. RSI (47) has given a Sell signal this week suggesting bearish momentum to increase. Stochastic Oscillator continues with its Sell signal as %K (46) remains below %D. MFI (56) has reduced but is still above the centerline. ADX has fallen further to 13 suggesting that the current trend has lost all of its strength. The Directional Indicators have given a Sell signal on Thursday as +DI went below –DI. Even though OBV has moved lower, it still continues in Buy mode as it has yet not formed lower top lower bottom formation. Thus majority of the Oscillators have turned bearish in the short term.

The Nifty O.I. PCR has reduced and is now at 1.13. For the current month series, highest Open interest build up is seen at 5800 Put and 6000 Call. This suggests that the market expects a trading range with support coming in at 5800 levels and resistance around 6000 levels.

The Trendline Resistance for the Sensex is at 20342. The Trendline Support for the Sensex is at 18954.

The Trendline Resistance for the Nifty is at 6089. Trendline Support for the Nifty falls at 5720.

For the week ahead, Sensex will find Support at 19477-19147-18802 and will find Resistance at 20065-20351-20664.

For the week ahead, Nifty will find Support at 5777-5683-5566 and will find Resistance at 5972-6061-6134.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5566

5683

5777

5886

5972

6061

6134

Sensex

18802

19147

19477

19748

20065

20351

20664

LAST WEEKS RECOMMENDATIONS:

Majority of the Recommendations reached their targets with the exception of Tata Global and United Phosphorous which just missed reaching their targets. But the Star Performer of the week was Dabur which went up by around 6%!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy BajAut

1966

2016

2050

125

Rs.10,500

Buy Dabur

167

172

177

2000

Rs.20,000

TatMot

294

301

303

1000

Rs. 9,000

TatGlob

155

160

158

2000

Rs. 6,000

UniPhos

147

152

150

2000

Rs. 6,000

Total

Rs.51,500

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell ICICI

932

953

902

872

Sell HDFCBk

644

653

628

611

Sell CoalInd

282

287

274

265

Sell BhartFrg

207

212

199

191

Sell Havells

754

765

736

717

WATCH OUT FOR:

Coal Ind

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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