Archives : CORRECTION WILL INTENSIFY BELOW 6650 - 02/05/2014.

CORRECTION WILL INTENSIFY BELOW NIFTY 6650 –  02/05/2014.

 

SHORT TERM TREND DOWN.

 

Just as mentioned in the previous week’s article, the market has taken support at the Support zone between Nifty 6665-6650. But in the process the Short term trend has turned down. Correction will intensify if this support level gets breached and then the relevant Correction levels will be at Sensex 21802-21451-21100 and Nifty 6512-6401-6291.

 


 

CORRECTION WILL INTENSIFY BELOW NIFTY 6650 –  02/05/2014.
 
SHORT TERM TREND DOWN.
 
Just as mentioned in the previous week’s article, the market has taken support at the Support zone between Nifty 6665-6650. But in the process the Short term trend has turned down. Correction will intensify if this support level gets breached and then the relevant Correction levels will be at Sensex 21802-21451-21100 and Nifty 6512-6401-6291.
 
TECHNICALLY SPEAKING.
 
Sensex opened the week at 22717, made a high of 22721, low of 22284 and closed the week at 22403. Thus it closed the week with a loss of 285 points. At the same time the Nifty opened the week at 6778, made a high of 6786, low of 6656 and closed the week at 6694. Thus the Nifty closed the week with a loss of 88 points.
 
This week both the indices have completed a Bearish Engulfing pattern on weekly charts which is a bearish reversal pattern. On a standalone basis, both Sensex and Nifty have formed an Opening Black body Marubuzo. On the daily charts, both the indices have formed a small black body candle which is acting as an Inside day when taken with previous day’s candle. Thus both daily as well as weekly charts suggest a continuation of bearish bias in the near term.
 
As pointed out in the previous week’s article, both Sensex and Nifty bounced back from their strong support zone between Sensex 22256-22197 and Nifty 6665-6650. Sensex bounced back from a low of 22284 and Nifty from 6656. If this support zone is breached then the market will undergo a correction of the bigger rise from Sensex 19963 to 22939 and Nifty 5933 to 6869. Thus the relevant Correction levels will be at Sensex 21802-21451-21100 and Nifty 6512-6401-6291.
 
Both the indices completed a Bullish Flag pattern when Sensex closed above 22023 and Nifty 6562. The pattern has a potential target of atleast Sensex 23126 and Nifty 6912 and on the higher side Sensex 24083 and Nifty 7191. These targets are likely to be achieved as long as Sensex remains above 21573 and Nifty above 6432.
 
The market has left behind a Bullish Upward Gap (Sensex 21539-21525 and Nifty 6413-6403). This Bullish Gap is acting as a strong support which got validated when the Sensex reversed from a low of 21573 and Nifty from 6432. Also the Bullish Gap mentioned above is also a Measuring Gap and as per Gap theory the target falls at Sensex 23101 and Nifty 6886.
 
Pattern formation is a dynamic process the indices have witnessed completion of Rising Wedge formation in weekly line chart. Rising Wedge has a natural tendency to give a bearish breakout but here it has given a bullish breakout and hence one can expect a strong upmove towards a potential target of Sensex 24429 and Nifty 7326.
 
When the indices closed above the previous top, both the indices completed a Bullish pattern in the intermediate term and the targets as per that falls at Sensex 23003 and Nifty 6897.
 
Thus as per Gap theory and Pattern analysis, Sensex seems headed towards a target of 23003-23126 and Nifty 6886-6912 in the intermediate term.
 
When the market overcame the previous top and made fresh lifetime highs, it marked the end of six year consolidation. On the weekly charts both Sensex and Nifty have completed a Bullish Saucer formation and the targets as per that will fall at Sensex 24799 and Nifty 7454 on the lower side and Sensex 27081 and Nifty 8145 on the higher side. The targets are likely to be achieved over a period of next 20 months.
 
Current rally has started from a low of Sensex 19963 and Nifty 5933. Hence it becomes imperative that this support level holds so that the indices can move towards higher targets. Thus a breach of Sensex 19963 and Nifty 5933 will derail the current bullish rally.
 
Both Sensex and Nifty have closed below the short term average of 20dma (Sensex – 22552 and Nifty – 6749), however both the indices continue to remain above the medium term average of 50dma (Sensex – 21879 and Nifty – 6529) and the long term average of 200dma (Sensex – 20616 and Nifty – 6133). Thus the trend in the short term has turned bearish whereas the trend in the medium term and the long term timeframe continues to remain bullish.
 
MACD is in Sell mode even though it is in positive zone. ROC has turned negative and hence continues with its Sell signal. RSI (51) has reduced and is now just above the equilibrium line. MFI (42) has dropped below the centerline suggesting negative money flow for the market. Stochastic Oscillator %K (29) is in Sell mode as it is below %D. ADX (27) has reduced suggesting that the uptrend has lost lot of its strength. The Directional Indicators are in Sell mode as +DI has gone below -DI. OBV too has started making lower top lower bottom formation. Buy signal in Bollinger Band now stands cancelled as the prices have closed below the mean of Bollinger Band. Thus Oscillators are suggesting a bearish bias in the near term.
 
Open Interest Put Call Ratio O.I.PCR for the May series is at a reduced level of 1.14 which indicates the market is now in a balance. Highest Open interest build up is seen at 7000 Call and 6500 Put. This suggests that the market expects a trading range with support coming in at 6500 levels and resistance around 7000 levels. Interestingly on Friday, strong Put build up was seen at the level of 6400. This suggests that the zone between Nifty 6500 to 6400 is likely to act as strong support.
 
For the week ahead, Sensex will find Support at 22110-21827-21573 and will find Resistance at 22681-22939-23236.
 
For the week ahead, Nifty will find Support at 6604-6510-6413 and will find Resistance at 6776-6569-6941.
 
INDEX LEVELS:
 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

6413

6510

6604

6694

6776

6869

6941

Sensex

21573

21827

22110

22403

22681

22939

23236

 

 
LAST WEEKS RECOMMENDATIONS:
 
All the recommendations of the previous week reached their targets with ease except for India Bull Real Estate. However the Star Performer of the week was UPL which went by an amazing 24%!!!

 

STOCK

Reco. Price

Tgt

Reached

LotSize

Profit

Buy Lupin

992

1018

1019

250

Rs.6,750

AuroPh

579

598

604

500

Rs.12,500

Buy UPL

230

247

286

1000

Rs.56,000

Allahabad

98

103

104

4000

Rs.24,000

IBReal

66

71

68

4000

Rs. 8,000

 

 

 

 

Total

Rs.1,07,250

 
 
 
THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Glenmark

630

618

649

669

Buy Lupin

1010

992

1038

1067

Buy ONGC

329

323

339

350

 Jain Irrigation

83

80

88

94

Buy NMDC

152

149

157

162

 
 
WATCH OUT FOR:
 

 

lupin1

 

Jain Irrigation

 

 

 

 

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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