Archives : EXTENSION OFTRADING RANGE - 17/02/2017.

EXTENSION OF TRADING RANGE - 17/02/2017.

BREAKOUT NOT SIGNIFICANT.

It was an interesting week where after consolidating for the first four days of the week, the indices managed a close above the trading range but the breakout took the form of a big black body candle with a big gap-up opening. Despite the big black body candle, there still remains a gap which implies that the breakout is not significant and as a result the trading range has now undergone an expansion on the higher side i.e. the range is between 28100-28700 for the Sensex and 8700-8900 for the Nifty. One can thus expect the market to spend more time in consolidating before attempting a breakout.


EXTENSION OF TRADING RANGE - 17/02/2017.

BREAKOUT NOT SIGNIFICANT.

It was an interesting week where after consolidating for the first four days of the week, the indices managed a close above the trading range but the breakout took the form of a big black body candle with a big gap-up opening. Despite the big black body candle, there still remains a gap which implies that the breakout is not significant and as a result the trading range has now undergone an expansion on the higher side i.e. the range is between 28100-28700 for the Sensex and 8700-8900 for the Nifty. One can thus expect the market to spend more time in consolidating before attempting a breakout.

TECHNICALLY SPEAKING.

Sensex opened the week at 28450, made a high of 28726, low of 28102 and closed the week at 28468. Thus it closed the week with a gain of 134 points. At the same time the Nifty opened the week at 8819, made a high of 8896, low of 8712 and closed the week at 8821. Thus the Nifty closed the week with a gain of 28 points.

On the daily charts, both the indices have formed a big black body candle after a big gap up opening. Despite closing higher on a day to day basis, one cannot expect a strong upward movement as the black body will act as a resistance. Only a close above the high of Fridays black body (Sensex – 28726 and Nifty – 8896) will negate the bearishness. On the weekly charts, both Sensex and Nifty have formed a Doji for second consecutive week. Doji is a neutral formation but if next week also forms a Doji, then it can be perceived as a bearish formation. Thus daily candlestick pattern suggests a sideways consolidation with a bearish bias, whereas weekly pattern is neutral.

After a sharp rally of 10% in the indices in last two months, both Sensex and Nifty were moving sideways in a very narrow range of Sensex 28100-28500 and Nifty 8700-8820. This Friday, the range got broken but it was a black body candle and hence we cannot consider this breakout as significant. As a result, the range has undergone an expansion on the higher side and now the range is between 28100-28700 for the Sensex and 8700-8900 for the Nifty. A break of this range on the downside can take the indices to test the support levels which are seen at Sensex 27980-27590 and Nifty 8672-8537. A bullish break of the above trading range will now lead the indices to test life time high levels for both the indices.

Since both the indices are trading over the critical 61.8% Retracement level of Sensex 27994 and Nifty 8558, the long term uptrend has resumed and the indices can be expected to target the previous top.

Two weeks back, both the indices had completed a Bullish Flag pattern which is a Bullish Continuation pattern. The target as per this pattern falls at Sensex 28997-29165 and 9017-9029 for the Nifty. The above targets are likely to be achieved as long as Sensex remains above 27590 and Nifty above 8537.

MACD has given a Sell despite being positive. Price ROC is positive and continues in Buy mode. RSI (68) suggests Bullish momentum. Stochastic Oscillator %K (75) is below %D and hence in Sell mode. ADX is at 36 which suggest that the Uptrend is very strong. Directional Indicators continue in Buy mode as +DI remains above –DI. MFI (56) suggests Positive Money Flow. OBV continues in Buy mode and continues to make higher top, higher bottom formation. Bollinger Band continues in Buy mode. Thus Price and Momentum Oscillators are giving mixed signals and one can expect further consolidation in the trading range. 

This week, both the indices continued to remain above the short term average of 20dma (Sensex – 28028 and Nifty – 8683), medium term average of 50dma (Sensex – 27203 and Nifty – 8394) and even the long term average of 200dma (Sensex – 27273 and Nifty – 8401). Thus the trend in the short term, medium term and even the long term timeframe continues to remain upwards.

Options data for February 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

8480

8598

8712

8821

8913

8996

9119

Sensex

27294

27646

28042

28468

28871

29289

29786

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy BharatFin

868

848

899

931

Buy Petronet

400

389

417

435

Buy CastroL

432

422

447

463

Buy TataPower

84

82

88

92

Buy Atlanta

85

82

90

96

WATCH OUT FOR:

PetronetLNG

Just Dial

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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