Archives : RISING WEDGE BEARISH BREAKOUT - 07/10/2016.

RISING WEDGE BEARISH BREAKOUT - 07/10/2016.

TREND TURNS BEARISH.

Market is now playing out the Bearish Rising Wedge breakout and is headed southwards. Rising Wedge is amongst the very few lead patterns and now its effect is being felt by the market as this week saw even minor pull-backs being sold. Interestingly markets closed below the 50dma, which has turned even the medium term trend to bearish. If Sensex breaches 27728 and Nifty 8558 then it will lead to another strong bearish pattern breakout, which will take the indices lower towards the long term average of 200dma.


RISING WEDGE BEARISH BREAKOUT - 07/10/2016.

TREND TURNS BEARISH.

Market is now playing out the Bearish Rising Wedge breakout and is headed southwards. Rising Wedge is amongst the very few lead patterns and now its effect is being felt by the market as this week saw even minor pull-backs being sold. Interestingly markets closed below the 50dma, which has turned even the medium term trend to bearish. If Sensex breaches 27728 and Nifty 8558 then it will lead to another strong bearish pattern breakout, which will take the indices lower towards the long term average of 200dma.

TECHNICALLY SPEAKING.

Sensex opened the week at 27997, made a high of 28477, low of 27919 and closed the week at 28061. Thus it closed the week with a gain of 196 points. At the same time the Nifty opened the week at 8666, made a high of 8806, low of 8635 and closed the week at 8697. Thus the Nifty closed the week with a gain of 86 points.

On the weekly charts, both Sensex and Nifty have formed a small white body candle with a long upper shadow which indicates selling at higher levels. Last two weeks candle combine to form a Bullish Harami pattern but it is not significant as it has occurred in sideways trend. On the daily charts, both the indices have formed a small black body candle with a longer lower shadow. Thus daily as well as weekly charts suggest continuation of bearish bias in the near term.

For the upward trend to be resumed, it is imperative that both the indices manage a close above Sensex - 28871 and Nifty – 8893. This will not only negate the Bearish Island Reversal but also clear the path for the testing of the life time high levels of the market.

Last week witnessed Rising Wedge breakout which is a bearish pattern. The target as per this Bearish pattern falls at Sensex 26522 and Nifty 8142. If the bearishness takes the indices below the above mentioned levels then expect extended lower targets at Sensex 25073 and Nifty 7656. The pattern will fail only if the indices close above current top of the rally i.e. above Sensex 29077 and Nifty 8968. Rising Wedge is amongst the very few lead patterns and hence it can often lead to multiple bearish pattern breakouts while continuing the downward move. A strong Trendline is at Sensex 27728 and Nifty 8558, which if breached will confirm another Bearish Reversal pattern.

The current fall is a Retracement of the rise from Sensex 25911 to 29077 and Nifty from 7927 to 8968. The relevant Retracement levels are placed at Sensex 27867-27494-27120 and Nifty 8570-8447-8325. In case the Correction gets extended then we will have to check the Retracement levels of the entire rise from Sensex 22494 to 29077 and Nifty from 6825 to 8968. The relevant extended Correction levels are placed at Sensex 26562-25786-25009 and Nifty 8150-7897-7644.

Immediate Support zone is between Sensex 27667-27494 and Nifty 8479-8447 which is due to confluence of Bullish Gap between Sensex 27667-27647 and Nifty 8479-8475 and the 50% Retracement of the intermediate fall which is at Sensex 27494 and Nifty 8447. A stronger Support zone exists between Sensex 25911-25786 and Nifty 7927-7897, which is due to the confluence of Intermediate bottom (Sensex – 25911 and Nifty – 7927) and 50% Retracement of the entire rally which is at Sensex 25786 and Nifty 7897.

MACD and Price ROC are both negative and continue in Sell mode. RSI (47) suggests bearish momentum. Stochastic Oscillator %K (47) is below %D, indicating a continuation in bearish mode. Bollinger Band continues with its Sell signal given in previous week. ADX has reduced further to 14 which suggest that there is no clear trend. Directional Indicators continues in Sell mode as +DI remains below –DI. MFI (32) suggests Negative Money Flow. Thus Oscillators are indicating bearishness in the near term.

This week, both the indices again played with both the short term average of 20dma (Sensex – 28355 and Nifty – 8746) and even the medium term average of 50dma (Sensex – 28229 and Nifty – 8706); but could not sustain above those levels. Both the indices continue to remain above the long term average of 200dma (Sensex – 26201 and Nifty – 8023). Thus the trend in the short term and medium term remains bearish whereas the trend in the long term timeframe continues to remain Bullish.

Options data for October series indicate highest Call Open Interest build-up at the strike of 9000 and highest Put build-up is at 8600. Thus Options data suggests a trading range with resistance coming in at 9000 and support at 8600.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8398

8489

8594

8697

8800

8893

8996

Sensex

27034

27358

27696

28061

28477

28871

29183

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell Infosys

1012

1036

975

937

Sell Siemens

1243

1270

1202

1160

Sell ApolloHosp

1320

1353

1270

1219

Sell NiiTTech

408

419

391

373

Sell IndoCount

707

727

676

643

WATCH OUT FOR:

Indo Count

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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