Archives : DEMAND LINE SUPPORTS THE MARKET - 03 01 2014

DEMAND LINE SUPPORTS THE MARKET – 03/01/2014.

FIRST WEEK OF 2014 ENDS ON NEGATIVE NOTE.

First week in the New Year ended on a negative note but bulls showed their mettle in the second half of Friday, as the market rebounded from a strong demand line. Both the indices have taken support at the critical trendline joining higher bottoms. A breach of this trendline on closing basis will complete a bearish pattern and that definitely will not be good news for the bulls.


DEMAND LINE SUPPORTS THE MARKET – 03/01/2014.

FIRST WEEK OF 2014 ENDS ON NEGATIVE NOTE.

First week in the New Year ended on a negative note but bulls showed their mettle in the second half of Friday, as the market rebounded from a strong demand line. Both the indices have taken support at the critical trendline joining higher bottoms. A breach of this trendline on closing basis will complete a bearish pattern and that definitely will not be good news for the bulls.

TECHNICALLY SPEAKING.

Sensex opened the week at 21260, made a high of 21331, low of 20731 and closed the week at 20851. Thus it registered a weekly loss of 342 points. At the same time the Nifty opened the week at 6336, made a high of 6358, low of 6171 and closed the week at 6211. Thus the Nifty closed the week with a loss of 102 points.

On the daily charts, both Sensex and Nifty have made a small white body candle which is like a Star formation. On the weekly charts both the indices have formed a big black body candle completing a Bearish Engulfing. But this pattern will have little significance as the prior trend was sideways. Hence both daily as well as weekly candlestick patterns point towards a slight bearish bias in the short term.

This week market bounced from the strong trendline support which is at Sensex 20845 and Nifty 6205. A breach of this trendline will be bad news for the bulls as then it will be completing a Rising Wedge formation which is a Bearish Reversal pattern.

Last time the market bounced was from the Support zone between Sensex 20651 – 20636 and Nifty 6142 – 6140. This support zone is due to the confluence formed by 61.8% Retracement (Sensex – 20651 and Nifty 6141) of the immediate rise and 38.2% Retracement (Sensex – 20636 and Nifty – 6142) of the intermediate rally.

Correction will resume only if Sensex falls below 20568 and Nifty falls below the low of 6129, and for that the Correction levels will be Sensex 20636-20374-20112 and Nifty 6142-6058-5973.

From a longer term perspective, Market has a strong support zone between Sensex 19444-19264 and Nifty 5738-5688. This is a confluence zone formed by the presence of Bullish Rising Gap between Sensex 19444-19293 and Nifty 5738-5688, intermediate low of Sensex 19264 and Nifty 5700 and the 50% Retracement level which is at Sensex 19385 and Nifty 5730. Thus this is a strong Support Zone and a breach of this support zone will end the current uptrend.

This week, both Sensex and Nifty have closed below the short term average of 20dma (Sensex – 20995 and Nifty – 6254). Both the indices tested the medium term average of 50dma (Sensex – 20823 and Nifty – 6193) but managed to close above that. Also both the indices continue to stay above the long term average of 200dma (Sensex – 19768 and Nifty – 5914). Thus the trend in the short term has turned negative, whereas the trend in the medium and long term timeframe continues to remain positive.

MACD gave a Sell signal on Thursday despite being in positive zone, whereas ROC continues with its Buy signal as it is in positive zone. RSI (48) has given a Sell signal, suggesting bearish momentum. MFI (44) continues to remain below the equilibrium line, suggesting money flowing out. Stochastic Oscillator continues in Sell mode as %K (51) is below %D. ADX is at a low level of 13, suggesting that the market is still in consolidation mode. The Directional Indicators have given a fresh Sell signal as +DI has gone below –DI. OBV continues with its Sell signal making lower tops lower bottoms. Thus Oscillators are pointing towards a bearish bias in the short term.

The Nifty O.I. PCR has reduced to 0.94. For the current series, highest Open interest build up continues to be at 6500 Call and 6200 Put. This suggests that the market expects a trading range with support coming in at 6200 levels and resistance around 6500 levels. Friday saw strong Call writing at the strike of 6300 and Put writing at 6000. Hence one can expect immediate resistance coming in at 6300 level. In case the support at 6200 level is broken, strong support will then be seen at 6000 level.

The Trendline Resistance for the Sensex is at 21308. The Trendline Support for the Sensex is at 20845.

The Trendline Resistance for the Nifty is at 6351. The Trendline Support for the Nifty is at 6205.

For the week ahead, Sensex will find Support at 20568-20203-18919 and will find Resistance at 21165-21483-21767.

For the week ahead, Nifty will find Support at 6129-6030-5932 and will find Resistance at 6317-6415-6492.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5932

6030

6129

6211

6317

6415

6492

Sensex

18919

20203

20568

20851

21165

21483

21767

LAST WEEKS RECOMMENDATIONS:

STOCK

Recom @

Target

Reached

Buy OFSS

3320

3392

3410

Buy Divis

1221

1255

1253

Buy BoI

236

251

251

Buy OiL

485

498

492

Buy DLF

171

177

175

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Lupin

932

917

956

982

Buy McDowell

2699

2660

2771

2845

Buy OFSS

3361

3299

3458

3560

Buy Havells

815

795

846

878

Buy Ranbaxy

478

468

493

509

WATCH OUT FOR:

Lupin

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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