Archives : CONSOLIDATION IN A NARROW RANGE - 22/07/2016.

CONSOLIDATION IN A NARROW RANGE - 22/07/2016.

BIAS REMAINS POSITIVE.

Last week was a ‘nothing’ week as the indices continued to trade in a very narrow range. Nifty continues to move in a small range (8594-8476) of just 118 points. This can be termed as a Consolidation with a bullish bias. A narrow range seems like a precursor of a bigger move which is likely to follow. A break on the lower side of the range will lead the Nifty to test the weekly Bullish Gap between 8407-8398; whereas a bullish breakout to the trading range will lead the Nifty towards the Flag target of 8869.


CONSOLIDATION IN A NARROW RANGE - 22/07/2016.

BIAS REMAINS POSITIVE.

Last week was a ‘nothing’ week as the indices continued to trade in a very narrow range. Nifty continues to move in a small range (8594-8476) of just 118 points. This can be termed as a Consolidation with a bullish bias. A narrow range seems like a precursor of a bigger move which is likely to follow. A break on the lower side of the range will lead the Nifty to test the weekly Bullish Gap between 8407-8398; whereas a bullish breakout to the trading range will lead the Nifty towards the Flag target of 8869.

TECHNICALLY SPEAKING.

Sensex opened the week at 27920, made a high of 28013, low of 27637 and closed the week at 27803. Thus it closed the week with a minor loss of 33 points. At the same time the Nifty opened the week at 8564, made a high of 8587, low of 8476 and closed the week at 8541. Thus the Nifty closed the week with no loss or gain.

On the weekly charts, both Sensex and Nifty have made a small Black body Star which is a neutral formation. On the daily charts, both the indices have formed a Bullish Harami pattern, which is a Bullish Reversal pattern. But in this case, it will have little significance as it has formed in a sideways consolidation. Thus daily as well as candlestick analysis suggests a consolidation in the near term with a bullish bias.

For better part of last two weeks, market has moved in a very narrow range of Sensex 28048-27637 and Nifty 8594-8476. This consolidation augurs well for the Bulls as it is undergoing a time-wise Correction. A break on the lower side will lead the indices to test the Bullish weekly Gap between Sensex 27358-27294 and Nifty 8407-8398; whereas a bullish breakout will lead the indices to test the Flag target of Sensex 28859 and Nifty 8869.

Market has left behind a Bullish Gap (Sensex 27358-27294 and Nifty 8407-8398) on both the indices. Interestingly, Nifty has managed to form this gap on daily as well as weekly chart. Thus this gap will act as strong support. Also this gap can also be classified as a Measuring Gap and the target for which falls at Sensex – 28741 and Nifty – 8833.

As the Sensex and Nifty continue to remain above their critical 61.8% Retracement level (Sensex – 27148 and Nifty 8243) of the entire fall from Sensex 30024 to 22494 and Nifty 9119 to 6825. This marks the end of Correction phase and is now signalling a move towards testing life highs of Sensex 30024 and Nifty 9119.

Two weeks back both the indices completed a Bullish Flag pattern and the target for the pattern falls at Sensex – 28859 and Nifty – 8869. Both the targets will be achieved as long as Sensex remain above 27034 and Nifty above 8287.

MACD and Price ROC both are positive and continue with their Buy signals. RSI (65) suggests bullish momentum. Stochastic Oscillator %K (82) is in Sell mode as it is below %D. ADX has improved to 23 which suggest that Uptrend is getting developed. Directional Indicators continue in Buy mode as +DI is above –DI. MFI (49) suggests Negative Money Flow. Thus majority of Oscillators are suggesting a bullish bias in the near term.

This week, both the indices continued to remain well above the short term average of 20dma (Sensex – 27348 and Nifty – 8388), medium term average of 50dma (Sensex – 26757 and Nifty – 8202) and even the long term average of 200dma (Sensex – 25696 and Nifty – 7831). Thus the trend in the short term, medium term and the long term timeframe continues to remain Bullish.

Options data for July series indicate highest Call Open Interest build-up has shifted to the strike of 8600 and highest Put build-up remains at 8400. Thus Option data suggests a small trading range with resistance coming in at 8600 and support at 8400.

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy HDFCBk

1223

1261

1239

500

Rs. 8,000

Buy LiCHsg

525

545

538

1100

Rs.14,300

Buy BhartiAir

378

392

380

1500

Rs. 3,000

Buy ZeeEnt

471

485

475

1300

Rs. 5,200

Buy ALLSec

283

296

295

2000

Rs.24,000

Total

Rs.54,500.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8212

8336

8444

8541

8627

8735

8844

Sensex

26617

27034

27385

27803

28176

28541

28822

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy DivisLab

1204

1179

1242

1281

Buy BemL

982

959

1017

1055

Buy HavellsInd

375

367

388

402

Buy TataMtrDvr

329

321

342

357

Buy PricoL

104

101

109

115

WATCH OUT FOR:

Havells

Aurobindo Pharma

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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