SIDEWAYS MOVEMENT CONTINUES – 17/01/2014.

6130 - 6350 : NIFTY SHORT TERM RANGE.

Since December, Nifty has been trading in a small range of 220 points i.e. between 6130 on the lower side and 6350 on the higher side. This consolidation augurs well for the market as we are testing the all time high levels. Greater the amount of time the market spends at these levels, better it will be for the long term scenario of the market. Despite good results by index heavyweights, the Nifty continues to move in a small range. If the trading range is small, traders find it difficult to trade. Interestingly ADX has been below 20 since November 2013, which is suggesting a no trade zone for the traders.

SIDEWAYS MOVEMENT CONTINUES – 17/01/2014.

6130 - 6350 : NIFTY SHORT TERM RANGE.

Since December, Nifty has been trading in a small range of 220 points i.e. between 6130 on the lower side and 6350 on the higher side. This consolidation augurs well for the market as we are testing the all time high levels. Greater the amount of time the market spends at these levels, better it will be for the long term scenario of the market. Despite good results by index heavyweights, the Nifty continues to move in a small range. If the trading range is small, traders find it difficult to trade. Interestingly ADX has been below 20 since November 2013, which is suggesting a no trade zone for the traders.

TECHNICALLY SPEAKING.

Sensex opened the week at 20850, made a high of 21379, low of 20850 and closed the week at 21063. Thus it registered a weekly gain of 305 points. At the same time the Nifty opened the week at 6189, made a high of 6346, low of 6189 and closed the week at 6261. Thus the Nifty closed the week with a gain of 90 points.

On the daily charts, both Sensex and Nifty have formed a black body candle completing an Evening Star pattern which is a bearish reversal pattern. But this pattern has occurred in a sideways consolidation and hence the significance is less. On the weekly charts both the indices have formed an Opening White body Marubuzo with a long upper shadow. The long upper shadow is suggestive of the selling seen at higher levels. Thus weekly pattern study is not as bearish as the formation on daily charts.

A Bearish Rising Wedge formation got completed two weeks back and the target as per this formation works out to be Sensex 19706 and Nifty 5841. The target is likely to be achieved as long as the Sensex remains below 21483 and Nifty below 6415.

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 long term uptrend.

This week, both Sensex and Nifty have just closed above the short term average of 20dma (Sensex – 21007 and Nifty – 6251). Both the indices continue to remain above the medium term average of 50dma (Sensex – 20824 and Nifty – 6193) besides already being above the long term average of 200dma (Sensex – 19869 and Nifty – 5940). Thus the trend in the short term, medium term and long term timeframe continues to remain positive.

MACD is positive and continues in Buy mode. RSI (52) continues to remain above the equilibrium line suggesting bullish momentum. ROC has just turned negative and has given a Sell signal. MFI (32) continues to remain below the equilibrium line, suggesting money flowing out. Stochastic Oscillator continues in Buy mode as %K (73) is above %D. ADX is at a low level of 14, suggesting that the market continues in sideways mode. The Directional Indicators continue with its Buy signal as +DI remains above –DI. OBV continues with its Sell signal making lower tops lower bottoms. Thus Oscillators are painting a mixed picture in the short term.

The Nifty O.I. PCR has improved slightly to 1.11. For the current series, highest Open interest build up has shifted to 6200 Put and 6300 Call. This suggests that the market expects a narrow trading range with support coming in at 6200 levels and resistance around 6300 levels. Interestingly Friday saw strong Put writing at the strike of 5900. This can be the next strong support below the level of 6200.

The Trendline Resistance for the Sensex is at 21285. Trendline Support is at 20647.

The Trendline Resistance for the Nifty is at 6317. Trendline Support is at 6143.

For the week ahead, Sensex will find Support at 20739-20443-20137 and will find Resistance at 21379-21650-22037.

For the week ahead, Nifty will find Support at 6181-6079-5972 and will find Resistance at 6358-6443-6571.

INDEX LEVELS:

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