ANOTHER BEAR ATTACK IN THE OFFING - 05/02/2016.

SELL ON RISE.

Even though the positive price movement of the indices made sure that the short term trend has turned positive but the fact remains that the medium and long term trend still remains bearish. Even though further pull-backs cannot be ruled out, studies clearly point towards formation of short positions at every rise. Thus market participants should keep in mind that the market still remains a Sell on Rise and should create short positions at every increment.

ANOTHER BEAR ATTACK IN THE OFFING - 05/02/2016.

SELL ON RISE.

Even though the positive price movement of the indices made sure that the short term trend has turned positive but the fact remains that the medium and long term trend still remains bearish. Even though further pull-backs cannot be ruled out, studies clearly point towards formation of short positions at every rise. Thus market participants should keep in mind that the market still remains a Sell on Rise and should create short positions at every increment.

TECHNICALLY SPEAKING.

Sensex opened the week at 24982, made a high of 25002, low of 24187 and closed the week at 24616. Thus it closed the week with a loss of 254 points. At the same time the Nifty opened the week at 7589, made a high of 7600, low of 7350 and closed the week at 7489. Thus the Nifty closed the week with a loss of 74 points.

On the daily charts, both the indices have formed a real White body candle. On the weekly charts both the indices have formed a Black body candle with a long lower shadow. Interestingly it falls short of being a Dark Cloud Cover. Thus daily candlestick study indicates a minor bullish bias in the near term.

Current price movement can be termed as a consolidation or a Relief rally and it is correcting the recent fall from 26197 to 23839 for the Sensex and 7972 to 7241 for the Nifty. The relevant Retracement levels are 24740-25018-25297 for the Sensex and 7520-7607-7693 for the Nifty.

The Bearish Gap between 25230-25357 for the Sensex and 7674-7721 for the Nifty will act as a strong Resistance going forward as it also includes the 61.8% Retracement level (Sensex – 25297 and Nifty – 7693) and the 50dma (Sensex – 25216 and Nifty – 7668). Thus the current Pull-Back rally will face stiff test at this critical Resistance zone.

In the higher timeframe, both the indices are retracing the strong long term upward rally which started from Sensex 17448 and Nifty 5118. The relevant Correction levels are placed at Sensex 25220-23736-22252 and Nifty 7591-7119-6646.

Despite the current Relief rally, both the indices remain on course to achieve the recent Bearish Head and Shoulders pattern target which is at Sensex 23276 and Nifty 7092. Also the higher degree Head and Shoulders still holds good, the target for which falls at Sensex 22552 and Nifty 6741.

MACD continues in Buy mode despite being in the negative zone. Price ROC is negative and continues in Sell mode. RSI (47) indicates bearish momentum. OBV continues to make lower top lower bottom formation and hence in Sell mode. MFI (46) indicates negative money flow in the market. ADX (36) indicates that the downtrend is still strong. The Directional Indicators continue in Sell mode as +DI remains below –DI. Thus majority of Oscillators are suggesting a bearish bias in the near term.

This week, both the indices continuously tested the short term average of 20dma (Sensex – 24525 and Nifty – 7456) and closed the week just above it. However, both Sensex and Nifty continue to remain below the medium term average of 50dma (Sensex – 25216 and Nifty – 7668) and even the long term average of 200dma (Sensex – 26589 and Nifty – 8057). Thus the trend in the short term timeframe has turned bullish, whereas the trend in the medium term and long term timeframe continues to remain bearish.

Options data for February series indicates highest Call Open Interest build-up at the strike of 7600 and highest Put build-up at the strike of 7400. Thus Option data suggests a narrow trading range with resistance coming in at 7600 and support at 7400.

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