Archives : AWAITING THE BEAR STORM - 01/03/2018.

AWAITING THE BEAR STORM - 01/03/2018.

 

RANGE - BEARISH BREAKOUT EXPECTED.

 

We were on the mark when we guided in the previous article that the Correction is not over. As expected the pull-back in prices lasted for few days before the bears hit out with vengeance. The Pull-back seems to be complete and we are in the process of breaking the trading range (Nifty 10700-10300) on the lower side. Critical Trendline support seems to be at 10378 which when taken out, will clear the way to break the previous low of 10276 as well as the 200dma (10120).

 

BANK NIFTY TO LEAD THE FALL.

 

The primary reason for the current bearish scenario is weak global markets, accompanied by the turmoil being faced in our public sector banks. The inherent weakness in the Banking sector is being reflected in the weak Bank Nifty. A close below 24700 in the Bank Nifty will open up the downside by another 1500-2000 points. Bank Nifty is likely to lead the way down in the Bear Storm which is brewing over the horizon. Fasten your seat belts and get ready for huge spikes in Volatility as the market faces its first major Correction in last 13 months. Correction will intensify and one should not be surprised to find Nifty in four digits.

 


AWAITING THE BEAR STORM - 01/03/2018.

 

RANGE - BEARISH BREAKOUT EXPECTED.

 

We were on the mark when we guided in the previous article that the Correction is not over. As expected the pull-back in prices lasted for few days before the bears hit out with vengeance. The Pull-back seems to be complete and we are in the process of breaking the trading range (Nifty 10700-10300) on the lower side. Critical Trendline support seems to be at 10378 which when taken out, will clear the way to break the previous low of 10276 as well as the 200dma (10120).

 

BANK NIFTY TO LEAD THE FALL.

 

The primary reason for the current bearish scenario is weak global markets, accompanied by the turmoil being faced in our public sector banks. The inherent weakness in the Banking sector is being reflected in the weak Bank Nifty. A close below 24700 in the Bank Nifty will open up the downside by another 1500-2000 points. Bank Nifty is likely to lead the way down in the Bear Storm which is brewing over the horizon. Fasten your seat belts and get ready for huge spikes in Volatility as the market faces its first major Correction in last 13 months. Correction will intensify and one should not be surprised to find Nifty in four digits.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 34225, made a high of 34610, low of 34015 and closed the week at 34046. Thus it closed the week with a loss of 96 points. At the same time the Nifty opened the week at 10526, made a high of 10631, low of 10447 and closed the week at 10458. Thus the Nifty closed the week with a loss of 33 points. 

 

On the daily charts, both Sensex and Nifty have formed a small black body Spinning Top. On the weekly charts, both the indices have formed small black body candle with an upper shadow. The upper shadow is indicative of selling pressure at higher levels. On the monthly charts, Nifty has formed a Bearish Engulfing pattern. This is a Bearish Reversal pattern which can induce bearishness for the next few months. Thus candlestick analysis indicates bearishness across daily, weekly as well as monthly timeframes.

 

Market has been supported for the past three weeks by strong Trendline (Sensex – 33778 and Nifty – 10378). Once this Trendline Support level is broken, we can expect testing of the long term average of 200dma (Sensex – 32676 & Nifty – 10120).

 

The bounce back (Sensex 34613-34963-35313 and Nifty 10618-10724-10830) which started after forming an intermediate bottom at Sensex 33482 and Nifty 10276 seems to be complete and we are now moving southwards to test the above mentioned intermediate bottoms. Trend will reverse only when Sensex closes above 35313 and Nifty 10830, till then every rally will be sold into.

 

If the current bottom of Sensex 33482 and Nifty 10276 is taken out, then we will have to check intermediate 13 months rally from low of Sensex 25717 and Nifty 7893. The Retracement levels for that are placed at Sensex 32347-31081-29815 and Nifty 9919-9533-9146. We also need to consider the last two years rally which started from a low Sensex 22494 and Nifty 6825. The relevant Correction levels are placed at Sensex 31115-29469-27823 and Nifty 9511-8999-8486. Strong confluence zone is formed between Sensex 31081-31115 and Nifty 9533-9511.

 

Both the indices have formed a Weekly Bearish Gap between Sensex 34874-35006 and Nifty 10702-10736. This Gap is aided by 50% Retracement of the current fall (Sensex – 34963 and Nifty 10724) and also the 50% Retracement of Intermediate Rise from low of Nifty 10033 i.e. at Sensex 34962 and Nifty 10737. Thus as seen, the weekly Bearish Gap is aided by strong Resistances which will make the confluence zone into a strong Resistance zone.

 

This week, both the indices have closed below the short term average of 20dma (Sensex – 34275 and Nifty - 10529) as well as medium term average of 50dma (Sensex – 34528 and Nifty – 10628). But still both the indices are above the long term average of 200dma (Sensex – 32676 and Nifty – 10120).  Thus the trend in short term and medium term timeframe remains bearish, whereas the trend in the long term timeframe continues to remain Bullish.

 

MACD and Price ROC are both negative and in Sell mode. RSI (43) suggests bearish momentum. Stochastic Oscillator is also in Sell mode. ADX is at 26 suggests that the Down Trend is consolidating. Directional Indicators are in Sell mode as +DI remains below –DI. MFI (42) suggests Negative Money Flow. OBV continues in Sell mode. Thus Oscillators are suggesting a bearish bias for the near term.

 

Options data for March series indicate highest Call Open Interest is now at the strike of 10800 whereas the highest Put build-up is at the strike of 10400. Thus Options data suggests a trading range with resistance at 10800 & support at 10400.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

10141

10232

10340

10458

10552

10637

10736

Sensex

32886

33321

33691

34046

34342

34666

35006

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell PEL

2547

2598

2467

2381

Sell BajajFinance

1659

1693

1607

1551

Sell Motherson

320

327

308

295

Sell ZeeEnt

555

565

540

524

Sell AxisBank

526

537

499

481

 

WATCH OUT FOR:

 

PEL Symm Triangle
 
Bajaj Finance h&s
 
Motherson 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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