Archives : CORRECTION TIME, FINALLY - 08/08/2014.

CORRECTION TIME, FINALLY –  08/08/2014.

GLOBAL FACTORS AT WORK.

As mentioned last week, it was the global factors which weighed heavy on the market. With the U.S. President Mr. Obama having authorized the military to make targeted air strikes in Iraq, the impact was visible on global markets. Also the weakening Rupee and rising crude prices did not help, as the market slid lower on Friday after opening with a gap down. As a result of this the market has started the much desired correction, but the question remains will it be a short lived as before or a deeper one.

 

 


CORRECTION TIME, FINALLY –  08/08/2014.

GLOBAL FACTORS AT WORK.

As mentioned last week, it was the global factors which weighed heavy on the market. With the U.S. President Mr. Obama having authorized the military to make targeted air strikes in Iraq, the impact was visible on global markets. Also the weakening Rupee and rising crude prices did not help, as the market slid lower on Friday after opening with a gap down. As a result of this the market has started the much desired correction, but the question remains will it be a short lived as before or a deeper one.

TECHNICALLY SPEAKING.

Sensex opened the week at 25631, made a high of 25928, low of 25232 and closed the week at 25329. Thus it closed the week with a loss of 151 points. At the same time the Nifty opened the week at 7639, made a high of 7752, low of 7540 and closed the week at 7568. Thus the Nifty closed the week with a loss of 32 points.

Both the indices have formed a black body candle with a small lower shadow, after a gap down opening on Friday. On the weekly chart both the indices have formed a black body candle with slightly long upper shadow. Thus both daily as well as weekly candlestick pattern suggests bearishness in the near term.

This week the indices completed a Bearish Rising Channel formation. The target as per this pattern breakout will be atleast 24131 to 23799 for the Sensex and 7157 to 7044 for the Nifty. These targets are likely to be achieved as long as Sensex remains below 25928 and Nifty below 7752.

Both the indices opened with a gap down on Friday and continued to fall. In the process a Bearish Breakaway Gap has been registered between Sensex 25406-25526 and 7592-7630 for the Nifty. This gap is aided by the presence of 50dma (Sensex – 25471 and Nifty – 7608) within and hence this gap will act as strong Resistance.

Market has once again resumed its correction and the immediate correction levels are placed at Sensex 25484-25231-24979 and Nifty 7564-7479-7394. The 61.8% correction level forms a confluence zone with intermittent bottoms at Sensex 24892 & 24878 and Nifty 7441 & 7422. Thus this confluence zone between Sensex 24979-24878 and Nifty 7441-7394 will act as strong Support zone for the market.

On a higher scale, a very strong Support zone is formed between Sensex 23879-23729 and Nifty 7112-7067. This is a result of confluence of 38.2% Retracement of the higher rally (Sensex – 23879 and Nifty 7112), 61.8% Retracement of the immediate rally (Sensex – 23813 and Nifty 7097) and the start of the intermediate Bullish Rising Gap (Sensex 23729 and Nifty 7067). The long term trend will continue to remain bullish as long as this Support zone is held.

This week both Sensex and Nifty have not only closed below the short term average of 20dma (Sensex – 25696 and Nifty – 7671) but also below the medium term average of 50dma (Sensex – 25471 and Nifty – 7608). But both the indices still continue to remain above the long term average of 200dma (Sensex – 22519 and Nifty – 6712). Thus the trend in the short term and medium term timeframe has turned down whereas the trend in the long term timeframe continues to remain up.

MACD continues in Sell mode despite being in positive territory. Meanwhile Price ROC is negative and hence in Sell mode. RSI (44) is below the equilibrium line and hence indicates bearish momentum. Stochastic Oscillator %K (20) continues in Sell mode as it remains below %D. ADX has dropped further to 25, which suggests a weakening of the current uptrend. The Directional Indicators have given a fresh Sell signal on Friday as -DI has gone above +DI. OBV remains sideways and hence does not confirm to the current price movement. Interestingly both RSI and MACD have confirmed negative divergence of the second order. Thus Oscillators are suggesting bearish bias in the near term.

Option writing for the current month series suggests support coming in at 7300 and resistance at 8000. Friday saw strong Call writing at 7700 strike and Put writing at 7500 strike which indicates immediate resistance at 7700 and immediate support at 7500.

Strong Trendline Support for the Sensex is at 24929. Trendline Resistance for the Sensex is at 26384.

Strong Trendline Support for the Nifty is at 7446. Trendline Resistance for the Nifty will be at 7864.

For the week ahead, Sensex will find Support at 25044-24644-24217 and Resistance will be at 25659-25928-26300.

For the week ahead, Nifty will find Support at 7474-7360-7269 and Resistance will be at 7661-7752-7840.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

7269

7360

7474

7568

7661

7752

7840

Sensex

24217

24644

25044

25329

25659

25928

26300

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

HeroMoto

2596

2676

2625

125

Rs. 3,625

Buy HUL

693

715

732

500

Rs.19,500

Buy Bharti

380

393

387

1000

Rs. 7,000

JustDial

1689

1812

1894

250

Rs.51,250

GMRInfra

28

31

30

10000

Rs.20,000

Total

Rs.1,01,375

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell ReLInfra

717

736

687

656

Sell TataMotors

433

444

417

400

Sell AxisBnk

371

377

361

350

Sell TataComm

342

350

330

317

Sell UPL

304

311

293

281

WATCH OUT FOR:

ReL Infra

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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