Archives : BACK TO SQUARE ONE - 12/02/2016.

BACK TO SQUARE ONE - 12/02/2016.

NIFTY BELOW 7000.

It is a harsh reality that the market is now realising, as the Sensex slides below 23000 and Nifty below 7000; thereby undoing all the good work done on the indices over a period of past 18 months. The ferocious selling by the bears continues unabated as the Nifty lost more than 500 points and Sensex over 1600 points for the week.

IS IT THE END OF BEAR MARKET?

The question on every market participants mind remains - Is it the end of Bear Market? The answer sadly is in the negative. The Bear market will continue as we are yet to reach the potential targets of Nifty 6741- 6646. But that does not rule out the possibility of a Corrective rally in the Downtrend. This week, both the indices have taken support at the 200 WMA (Sensex – 22824 and Nifty – 6874). The last time this average was breached, was way back in December 2011. This is all the more reason for the Corrective rally to commence in the near term, but one should remember that all rallies will be sold into.


BACK TO SQUARE ONE - 12/02/2016.

NIFTY BELOW 7000.

It is a harsh reality that the market is now realising, as the Sensex slides below 23000 and Nifty below 7000; thereby undoing all the good work done on the indices over a period of past 18 months. The ferocious selling by the bears continues unabated as the Nifty lost more than 500 points and Sensex over 1600 points for the week.

IS IT THE END OF BEAR MARKET?

The question on every market participants mind remains - Is it the end of Bear Market? The answer sadly is in the negative. The Bear market will continue as we are yet to reach the potential targets of Nifty 6741- 6646. But that does not rule out the possibility of a Corrective rally in the Downtrend. This week, both the indices have taken support at the 200 WMA (Sensex – 22824 and Nifty – 6874). The last time this average was breached, was way back in December 2011. This is all the more reason for the Corrective rally to commence in the near term, but one should remember that all rallies will be sold into.

TECHNICALLY SPEAKING.

Sensex opened the week at 24637, made a high of 24698, low of 22600 and closed the week at 22986. Thus it closed the week with a massive loss of 1630 points. At the same time the Nifty opened the week at 7489, made a high of 7512, low of 6869 and closed the week at 6980. Thus the Nifty closed the week with a loss of 509 points.

On the daily charts, both the indices have formed a small black body Spinning Top with a long lower shadow which indicates buying at lower levels. Both Sensex and Nifty completed a Homing Pigeon pattern on Friday which is a bullish reversal pattern, requiring confirmation. On the weekly charts both the indices formed a big black body candle in line with the downtrend. Thus daily candlestick study indicates a bullish bias whereas the weekly study does not confirm with that view.

As both the indices have formed a bullish candle stick pattern after taking support at the 200 WMA, one cannot rule out a possibility of a bounce back. The relevant Retracement levels are 23518-23801-24085 for the Sensex and 7148-7235-7321 for the Nifty.

The Bearish Gap between 24111-24196 for the Sensex and 7323-7363 for the Nifty will act as a strong Resistance zone going forward as it also includes the 61.8% Retracement level (Sensex – 24085 and Nifty – 7321) and the 20dma (Sensex – 24222 and Nifty – 7360). Thus the Pull-Back rally is unlikely to cross this 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.

This week, both the indices achieved the Bearish Head and Shoulders (daily chart) target of Sensex 23276 and Nifty 7092. Both Sensex and Nifty remain on track to achieve the higher degree Head and Shoulders (weekly chart), the target for which falls at Sensex 22552 and Nifty 6741.

MACD and Price ROC are both negative and continue in Sell mode. RSI (28) and Stochastic Oscillator %K (9) are in oversold zone. OBV continues to make lower top lower bottom formation and hence in Sell mode. MFI (32) indicates negative money flow in the market. ADX (40) indicates that the downtrend is very strong. The Directional Indicators continue in Sell mode as +DI remains below –DI. Thus majority of Oscillators are suggesting a bearish bias whereas momentum oscillators are in oversold zone, suggesting a pull-back from oversold levels.

This week, both the indices closed below the short term average of 20dma (Sensex – 24222 and Nifty – 7360). Also both Sensex and Nifty continue to remain below the medium term average of 50dma (Sensex – 24966 and Nifty – 7611) and even the long term average of 200dma (Sensex – 26486 and Nifty – 8034). Thus the trend in the short term timeframe has turned bearish, whereas the trend in the medium term and long term timeframe continues to remain bearish.

India VIX has climbed this week and closed at 24. In the process, it has given a breakout and is now headed towards its pattern target level of 34. Options data for February series indicates highest Call Open Interest build-up at the strike of 7500 and highest Put build-up at the strike of 6800. Thus Option data suggests a wide trading range with resistance coming in at 7500 and support at 6800.

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

PageInd

11800

11090

9850

50

Rs.97,500

Maruti

3723

3592

3461

200

Rs.52,400

Sell RiL

971

908

888

500

Rs.41,500

Century

488

441

410

1000

Rs.78,000

Sell IOC

395

358

345

1000

Rs.50,000

Total

Rs.3,19,400.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

6646

6742

6869

6980

7067

7177

7271

Sensex

21924

22252

22600

22986

23338

23636

23938

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell Britannia

2564

2624

2471

2375

Sell SRF

1094

1121

1053

1010

Sell TorrentPh

1235

1271

1181

1125

Sell HCLTech

798

818

767

735

Sell IBuLHsg

601

617

576

549

WATCH OUT FOR:

IBulHsg

BPCL

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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