Archives : At An Interesting Juncture - 18/10/2013.
AT AN INTERESTING JUNCTURE – 18/10/2013.
ALL TIME HIGHS WITHIN SIGHT.
The good work started by the Bulls in the September series seems to be continuing in the current series. Market is moving from strength to strength and has closed at a very important juncture. Both Sensex and Nifty have closed just below a critical Trendline. This Trendline (Sensex – 21005 and Nifty – 6318) has been providing strong resistance to the market for a long period of time and a breach of this trendline will signal an end of long term consolidation phase for the market and will signal that the market is ready to take the big leap forward. If this were to happen then not only will the all time highs be taken out with ease, but the market will be ready for the next bull move.
Sensex opened the week at 20534, made a high of 20932, low of 20375 and closed the week at 20882. Thus it registered a weekly gain of 354 points. At the same time the Nifty opened the week at 6093, made a high of 6201, low of 6032 and closed the week at 6189. Thus the Nifty closed the week with a gain of 93 points.
Both Sensex and Nifty have formed a Bullish white body candle on the weekly charts which follows last weeks big white body candle. Also on the daily charts, both the indices have formed a Bullish Opening White body Marubuzo which has removed the bearishness of the previous two days. Thus both daily as well as weekly charts suggest continuation of bullishness in the near term.
This week both Sensex and Nifty bounced back from the gap formed last Friday between Sensex 20368 – 20323 and Nifty 6046 - 6033. Thus this gap acted as a support as the Sensex bounced from a level of 20375 and Nifty 6032. Thus a breach of this low will signal a trend reversal in the short term timeframe.
The current bullish rally started two weeks back when both the indices formed a Bullish Island Reversal. Current rally has shown tremendous strength and as a result the market has just closed below a critical Trendline (Sensex – 21005 and Nifty – 6318) and a breach of this Trendline will set the market to not only cross the all time highs but move towards a potential target of short term target of Sensex 22214 and Nifty 6584.
The current rally started from the low of Sensex 19264 and Nifty 5700. This was from the strong Support Zone formed by the confluence of the Bullish Rising Gap between Sensex 19293 – 19444 and Nifty 5688-5738 along with presence of 200dma for the Sensex (19448) and 50dma for the Nifty (5734) inside this gap. This is a critical gap and a breach of this gap will end the current uptrend.
The above mentioned Gap is also a Measuring Gap (Sensex 19293 – 19444 and Nifty 5688-5738) in the current upward rally (the rally which started from a low of Sensex 17448 and Nifty 5118). Then as per Gap theory, the target for the upward rally works out to be Sensex 21289 and Nifty 6308.
This week both Sensex and Nifty have remained above the long term average of 200dma (Sensex – 19448 and Nifty – 5847), medium term average of 50dma (Sensex – 19392 and Nifty – 5734) and the short term average of 20dma (Sensex – 20115 and Nifty – 5961). Thus the trend in the short term, medium term and long term timeframe remains positive.
MACD and ROC both continue with Buy signals. RSI (67) suggests higher bullish momentum. MFI (65) continues in Buy mode, suggesting money flowing in. Stochastic Oscillator continues with its Buy signal (%K is above %D). ADX is at 17, suggesting that the market trend is sideways. The Directional Indicators continue with its Buy signal as +DI remains above -DI. OBV continues to make higher top, higher bottom. Both Sensex and Nifty touched the upper Bollinger band on Friday, but could not manage to close above that, hence no signal. Oscillators suggest a bullish bias in the short term.
The Nifty O.I. PCR has increased to 1.56. For the current month series, highest Open interest build up continues to remain at 5700 Put and 6300 Call. This suggests that the market expects a trading range with support coming in at 5700 levels and resistance around 6300 levels. Friday saw high amount of Put writing at 6100 strike which indicates strong support at that level, in the short term.
The Trendline Resistance for the Sensex is at 21005. Trendline Support is at 20220.
The Trendline Resistance for the Nifty is at 6318. Trendline Support is at 6012.
For the week ahead, Sensex will find Support at 20534-20203-19826 and will find Resistance at 21108-21362-21623.
For the week ahead, Nifty will find Support at 6093-5982-5877 and will find Resistance at 6284-6357-6443.
LAST WEEKS RECOMMENDATIONS:
Only Federal Bank and Adani Port reached their targets. The Star Performer of the week was Federal Bank which went up by around 11%!!!
THIS WEEKS RECOMMENDATIONS:
WATCH OUT FOR: