Archives : RECOVERY; STILL NOT A REVERSAL - 21/10/2016.

RECOVERY; STILL NOT A REVERSAL - 21/10/2016.

BOUNCE BACK FROM 8500.

As expected both the indices went down and tested the critical support of Sensex 27728 and Nifty 8558, but managed to recover and once again close in the vicinity of medium term average of 50dma and short term average of 20dma. A close above 50dma and 20dma will push the indices to test the level of Sensex 28477 and Nifty 8806 which is the failure point of the Bearish Head and Shoulders pattern. Till then Nifty will continue to trade in a 300 point range between 8500 on the lower side and 8800 on the higher side.


RECOVERY; STILL NOT A REVERSAL - 21/10/2016.

BOUNCE BACK FROM 8500.

As expected both the indices went down and tested the critical support of Sensex 27728 and Nifty 8558, but managed to recover and once again close in the vicinity of medium term average of 50dma and short term average of 20dma. A close above 50dma and 20dma will push the indices to test the level of Sensex 28477 and Nifty 8806 which is the failure point of the Bearish Head and Shoulders pattern. Till then Nifty will continue to trade in a 300 point range between 8500 on the lower side and 8800 on the higher side.

TECHNICALLY SPEAKING.

Sensex opened the week at 27776, made a high of 28212, low of 27488 and closed the week at 28077. Thus it closed the week with a gain of 404 points. At the same time the Nifty opened the week at 8612, made a high of 8727, low of 8506 and closed the week at 8693. Thus the Nifty closed the week with a gain of 110 points.

On the daily charts, both Sensex and Nifty have formed a small black body candle which has little significance. On the weekly charts, once again both the indices have formed a Homing Pigeon formation which is a bullish reversal pattern, but here it has occurred in sideways consolidation and hence cannot be granted significance. Thus candlestick study indicates uncertainty in the near term. 

Last week saw formation of a Bearish Measuring Gap between Sensex 28042-28068 and Nifty 8681-8703. The target as per Gap theory falls at Sensex 27033 and Nifty 8416. Besides, this Gap is also acting as strong Resistance in the near term.

Both the indices have already 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. Besides, a Bearish Head and Shoulders pattern was also completed, with target of Sensex 26353 and Nifty 8138. The Head and Shoulders pattern can fail only if we close above Sensex 28477 and Nifty 8806.

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.

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.

In the near term, there is a Resistance in the form of a downward sloping Trendline which falls at Sensex 28392 and Nifty 8735.

MACD and Price ROC are both negative and continue in Sell mode. RSI (50) has jus went above the centreline, generating a fresh Buy signal. Stochastic Oscillator %K (59) is above %D, indicating a continuation in bullish mode. Sell signal in Bollinger Band has been negated this week. ADX has been reduced to 16 which suggest that there is no clear trend. Directional Indicators continues in Sell mode as +DI remains below –DI. MFI (41) suggests Negative Money Flow. Thus Oscillators are indicating a mixed picture with no clear bias.

This week, both the indices tested both short term average of 20dma (Sensex – 28104 and Nifty – 8692) as well as medium term average of 50dma (Sensex – 28217 and Nifty – 8709). Nifty has just managed a close above the 20dma whereas Sensex has failed to do so. Both Sensex and Nifty remain below the 50dma. Both the indices continue to remain above the long term average of 200dma (Sensex – 26284 and Nifty – 8054). 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

8475

8594

8693

8800

8893

8968

Sensex

27034

27385

27716

28077

28477

28871

29194

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Page Ind

16520

16136

17104

17723

Buy UPL

718

699

747

777

Buy TataChem

580

564

604

629

Buy Cairn

232

226

241

251

Buy Exide

204

199

212

221

WATCH OUT FOR:

Exide

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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