Archives : 20DMA ACTS AS SUPPORT - 10/11/2017.

20DMA ACTS AS SUPPORT - 10/11/2017.

 

TREND REMAINS POSITIVE.

 

As expected the ongoing Upward Rally was halted as the daily Momentum Oscillators went into Overbought zone. This resulted in a dip which has taken both Sensex and Nifty to the support level in the form of short term moving average of 20dma. For the past three consecutive trading sessions, the 20dma has provided good support to the market and as a result the trend has continued to be Bullish. Strong Support zone exists at the level of 10240-10237 for the Nifty.

 

 

 

20DMA ACTS AS SUPPORT - 10/11/2017.

 

TREND REMAINS POSITIVE.

 

As expected the ongoing Upward Rally was halted as the daily Momentum Oscillators went into Overbought zone. This resulted in a dip which has taken both Sensex and Nifty to the support level in the form of short term moving average of 20dma. For the past three consecutive trading sessions, the 20dma has provided good support to the market and as a result the trend has continued to be Bullish. Strong Support zone exists at the level of 10240-10237 for the Nifty.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 33710, made a high of 33865, low of 33108 and closed the week at 33314. Thus it closed the week with a loss of 371 points. At the same time the Nifty opened the week at 10431, made a high of 10490, low of 10254 and closed the week at 10321. Thus the Nifty closed the week with a loss of 131 points.

 

On the daily charts, both the indices have formed a small white body Spinning Top on Friday. This comes on the back of Homing Pigeon formation which was completed on Thursday but failed to confirm. On the weekly charts, both Sensex and Nifty have formed a black body candle which cannot be taken as a bearish formation. Thus candlestick study indicates a neutral bias in the short term.

 

Last week saw a Bearish Engulfing pattern being formed on Tuesday, which started the current decline. In case of further decline, one can expect the Bullish Gap between Sensex 32804-32670 and 10240-10237 for the Nifty, to act as strong Support.

 

In the current decline, the indices have taken support at the support level of 20dma (Sensex – 33066 and Nifty – 10304) for three consecutive days. In case of the indices closing below this level, one can expect a Retracement of the upward rally from 31081 to 33865 for the Sensex and 9685 to 10490 for the Nifty. The relevant Correction levels are placed at Sensex 32802-32474-32145 and 10183-10088-9993 for the Nifty.

 

Three weeks back saw both the indices completing a Bullish Flag pattern. The target as per this pattern falls at Sensex 34317 and Nifty 10851. These targets will be achieved as long as the Sensex and Nifty remain above 32312 and 10123 respectively.

 

The key level to watch out for in this entire upward rally is the support taken at the higher bottom which is at Sensex 31128 and Nifty 9685. A break of this support will interrupt the higher top higher bottom formation sequence for the indices for the first time since December 2016. As a result, we will be looking at the Correction of the entire rally which started from Sensex 25717 and 7896 for the Nifty.

 

On the weekly formation, both the indices had completed a Cup and Handle formation and the targets are Sensex 34677-37554 and Nifty 10536-11413. If one considers the Cup and Handle formation of 7 years from 2007 to 2014, the target for that pattern falls at Sensex 34715 and Nifty 10462. The Golden Ratio target of the current pattern weekly pattern of 2 years is at Sensex 34677 and Nifty 10536. Thus in the medium term one can expect a test of the above targets i.e. Sensex 34677-34715 and Nifty 10462-10536.

 

MACD has given a Sell signal despite being in the positive zone. Price ROC is still positive and in Buy mode. RSI (57) suggests bullish momentum. ADX has dropped to 20, which suggests trend is sideways. Directional Indicators continue in Buy mode. MFI (67) suggests Positive Money Flow. OBV continues to make higher top higher bottom formation. Thus Oscillators are suggesting a positive bias for the near term.

 

This week, both the indices tested the short term average of 20dma (Sensex – 33066 and Nifty – 10304) for three consecutive days and managed to close above that. Both the indices continue to remain well above the medium term average of 50dma (Sensex – 32341 and Nifty – 10105) and also the long term average of 200dma (Sensex – 30785 and Nifty – 9557).  Thus the trend in short term, medium term as well as the long term timeframe continues to remain Bullish.

 

Options data for November series indicate highest Call Open Interest is at the strike of 10500 whereas the highest Put build-up is at 10200. Thus Options data suggests a trading range with resistance coming at 10500 & support at 10200.

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy UltraTech

4450

4354

4597

4753

Buy L&T

1264

1234

1309

1355

Buy Jet Air

684

667

711

739

Buy Ujjivan Fin

382

373

396

411

Buy JsW SteeL

270

264

279

289

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

10043

10137

10237

10321

10415

10536

10662

Sensex

32312

32686

32989

33314

33667

33967

34317

 

WATCH OUT FOR:

 

Jet Air
 
TCS
 
L&T
 
 
 

 

 

 

 

 

 

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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