Archives : NO REASON TO WORRY, UPTREND INTACT - 05/12/2014.
NO REASON TO WORRY, UPTREND INTACT - 05/12/2014.

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ADOPTING HEDGING STRATEGIES.

I would classify the week gone by as a sluggish week but certainly not a bearish one. Adopting some amount of caution has not harmed anyone and it certainly will help if one adopts some risk reducing hedging strategies. A black body formation on the weekly chart is not suggestive of any bearishness and hence it can be termed as profit booking near the short term target levels. A correction of the first order will set in only when Nifty closes below the level of 8429. In such a case, Nifty will find strong support at the Support Zone between 8198-8175.

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NO REASON TO WORRY, UPTREND INTACT - 05/12/2014.

ADOPTING HEDGING STRATEGIES.

I would classify the week gone by as a sluggish week but certainly not a bearish one. Adopting some amount of caution has not harmed anyone and it certainly will help if one adopts some risk reducing hedging strategies. A black body formation on the weekly chart is not suggestive of any bearishness and hence it can be termed as profit booking near the short term target levels. A correction of the first order will set in only when Nifty closes below the level of 8429. In such a case, Nifty will find strong support at the Support Zone between 8198-8175.

TECHNICALLY SPEAKING.

Sensex opened the week at 28748, made a high of 28809, low of 28370 and closed the week at 28458. Thus it closed the week with a loss of 235 points. At the same time the Nifty opened the week at 8605, made a high of 8626, low of 8504 and closed the week at 8538. Thus the Nifty closed the week with a loss of 50 points.

On the daily charts, both the indices have formed a black body candle but it is not a bearish formation. Interestingly, all the five candle bodies this week are within the trading range of the candle formed on last Friday; which simply shows that the entire week was like a rest week. On the weekly chart, both Sensex and Nifty have formed a black body candle which in this case is a bullish continuation pattern. Thus the daily and weekly candlestick study does not suggest any bearishness.

Both Sensex and Nifty continue to hover around the critical Rising Trendline. Minor profit booking was observed after reaching near the immediate target of Sensex - 28918 and Nifty - 8656 respectively, which is as per Gap theory. Above which one can expect both the indices to move towards intermediate rally target (golden ratio) which is at Sensex 29554 and Nifty 8893.

Short term Correction will start only when Sensex closes below 28217 and Nifty below the level of 8429. In such a case the Correction levels will be at Sensex 27710-27366-27023 and Nifty 8281-8175-8068.

Interestingly the first bullish Rising Gap between Sensex 27438-27390 and Nifty 8198-8181 is coinciding with the 50% Correction level mentioned above and hence a strong Support zone is formed between Sensex 27438-27366 and Nifty 8198-8175.

Both the indices continue to remain above the short term average of 20dma (Sensex – 28269 and Nifty – 8461), medium term average of 50dma (Sensex – 27394 and Nifty – 8191) and even above the long term average of 200dma (Sensex – 24916 and Nifty – 7443). Thus the trend in the short term, medium term and the long term timeframe continues to remain bullish.

MACD has generated a Sell signal this week, despite being in the positive territory. Price ROC is positive and continues with its buy signals. RSI has dropped slightly to 63 but it still suggests bullish momentum. The Stochastic oscillator has given a Sell signal as %K (71) has gone below the signal line %D. Also the MFI has fallen to 56 but it still suggests positive money flow in the market. ADX has further increased to 36, which indicates that the uptrend is getting stronger. Direction Indicators continue in buy mode as +DI remains above –DI. Bollinger Band continues in Buy mode. Except for certain Oscillators which are overbought and are exhibiting negative divergence of the first order, majority of them are suggesting bullishness in the short term. 

Option data suggest highest Put Open Interest is at the strike of 8500 and highest Call build-up is at the strike of 8600. Thus Option data suggests a very narrow trading range with support coming in at 8500 and resistance around 8600.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8198

8320

8429

8538

8626

8742

8816

Sensex

27438

27822

28126

28458

28822

29274

29553

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

HeroMoto

3147

3238

3269

125

Rs.15,250

Buy BoB

1087

1135

1119

250

Rs. 8,000

AkzoInd

1332

1420

1434

250

Rs.25,500

Buy OBC

305

320

322

1000

Rs.17,000

ShasunPh

245

272

291

1000

Rs.46,000

Total

Rs.1,11,750.

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy HindZinc

174

170

180

187

Buy ITC

391

384

403

416

Buy GodrejCP

1001

980

1035

1069

Buy KarnatakBk

151

147

157

163

Buy KalpataruPwr

186

181

194

203

WATCH OUT FOR:

Hind Zinc

South Ind Bank

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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