Archives : 200 DMA TO BE TESTED - 14/10/2016.

200 DMA TO BE TESTED - 14/10/2016.

8558 - CRITICAL LEVEL.

Even though there is a bullish candlestick pattern formed on the daily charts on Friday, it will not lead to trend reversal in the short or medium term timeframe. It can be termed as a price reversal in the daily timeframe and once that minor pull-back in price is done, one can expect a break of the critical Trendline support of Nifty 8558. Interestingly the equivalent level for the Sensex (27728) has been breached. Thus as a result one can expect the indices to move lower to test the long term average of 200dma.


200 DMA TO BE TESTED - 14/10/2016.

8558 - CRITICAL LEVEL.

Even though there is a bullish candlestick pattern formed on the daily charts on Friday, it will not lead to trend reversal in the short or medium term timeframe. It can be termed as a price reversal in the daily timeframe and once that minor pull-back in price is done, one can expect a break of the critical Trendline support of Nifty 8558. Interestingly the equivalent level for the Sensex (27728) has been breached. Thus as a result one can expect the indices to move lower to test the long term average of 200dma.

TECHNICALLY SPEAKING.

Sensex opened the week at 28144, made a high of 28216, low of 27548 and closed the week at 27673. Thus it closed the week with a loss of 388 points. At the same time the Nifty opened the week at 8735, made a high of 8745, low of 8541 and closed the week at 8583. Thus the Nifty closed the week with a loss of 114 points.

On the daily charts, both Sensex and Nifty have formed a Homing Pigeon formation which is a bullish reversal pattern requiring confirmation. On the weekly charts, both Sensex and Nifty have formed a big black body candle. Thus even though the daily candlestick pattern indicate a minor price reversal, the weekly candlestick pattern indicate bearishness to continue.

This week opened with a Bearish Gap between Sensex 28042-28068 and Nifty 8681-8703. This Gap will act as strong Resistance in the near term. Also this Gap can be classified as a Measuring Gap, the target as per Gap theory falls at Sensex 27033 and Nifty 8416.

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.

Two weeks back, both the indices witnessed a Bearish Rising Wedge breakout, the least target as per this Bearish pattern falls at Sensex 26522 and Nifty 8142 and extended lower targets are at Sensex 25073 and Nifty 7656. Rising Wedge is a Lead pattern and it has given rise to Head and Shoulders pattern which is a Bearish Reversal pattern. Interestingly Sensex has closed below the neckline and is now headed towards target of 26353, whereas Nifty needs a close below 8558 to complete the bearish breakout and the target will be at 8138. The pattern can fail only if we close above Sensex 28477 and Nifty 8806.

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 (40) suggests bearish momentum. Stochastic Oscillator %K (22) is below %D, indicating a continuation in bearish mode. Bollinger Band continues with its Sell signal. ADX has been reduced to 15 which suggest that there is no clear trend. Directional Indicators continues in Sell mode as +DI remains below –DI. MFI (25) suggests Negative Money Flow. Thus Oscillators are indicating bearishness in the near term.

This week, both the indices remained below the short term average of 20dma (Sensex – 28249 and Nifty – 8724) and the medium term average of 50dma (Sensex – 28211 and Nifty – 8705). Both the indices continue to remain above the long term average of 200dma (Sensex – 26232 and Nifty – 8035). 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 8500. Thus Options data suggests a trading range with resistance coming in at 9000 and support at 8500.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

8294

8398

8489

8583

8681

8800

8893

Sensex

26617

27034

27358

27673

28048

28477

28871

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell HDFCBank

1262

1284

1228

1193

Sell HUL

842

860

815

787

Sell Lupin

1465

1500

1412

1358

Sell BajajAuto

2798

2870

2690

2580

Sell Cummins

870

889

841

811

WATCH OUT FOR:

HDFC Bank

Nifty H&S

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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