Archives : CORRECTION STRIKES - 07/09/2018.

CORRECTION STRIKES - 07/09/2018.

 

ANOTHER BOUT OF SELLING EXPECTED.

 

Just when everything looked like a One-Way Street for the Bulls, the Bears struck and the Bulls were caught unaware. After a stupendous one way rally of 1200 points on the Nifty and continuous formation of nine white body candles on the weekly time-frame, the Correction finally struck. In just two days, the Nifty lost almost 370 points from the top and Sensex around 1200 points. Despite witnessing a Pull-Back in the last two days of the week, one cannot say that the market is out of the woods. Only when the Nifty continues to stay above 11620, can we say the Correction is complete. The Correction looks incomplete and we may see another bout of selling by the Bears which might take the indices lower. Strong Support zone exists at Nifty 11249-11245.



CORRECTION STRIKES - 07/09/2018.

 

ANOTHER BOUT OF SELLING EXPECTED.

 

Just when everything looked like a One-Way Street for the Bulls, the Bears struck and the Bulls were caught unaware. After a stupendous one way rally of 1200 points on the Nifty and continuous formation of nine white body candles on the weekly time-frame, the Correction finally struck. In just two days, the Nifty lost almost 370 points from the top and Sensex around 1200 points. Despite witnessing a Pull-Back in the last two days of the week, one cannot say that the market is out of the woods. Only when the Nifty continues to stay above 11620, can we say the Correction is complete. The Correction looks incomplete and we may see another bout of selling by the Bears which might take the indices lower. Strong Support zone exists at Nifty 11249-11245.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 38915, made a high of 38934, low of 37774 and closed the week at 38389. Thus it closed the week with a loss of 256 points. At the same time the Nifty opened the week at 11751, made a high of 11751, low of 11393 and closed the week at 11589. Thus the Nifty closed the week with a loss of 91 points.

 

On the daily charts, both Sensex and Nifty have formed a small White body candle which has been the case for the last three days. On the weekly time-frame, both the indices have formed an Opening Black body Marubuzo with a long lower shadow, which reduces the bearishness of the pattern. Along with previous week, the indices have formed a Bearish Engulfing pattern. Thus daily candlestick pattern indicates a pause in bearishness whereas the weekly time-frame suggests a Bearish bias.

 

The Bears struck a massive blow to the market starting from Monday as Sensex fell around 1160 points in two days flat and Nifty 358 points. This has triggered the much wanted Correction. Immediate Correction levels are placed at Sensex 37199-36646-36093 and 11247-11089-10930 for the Nifty. Higher degree Correction levels are placed at Sensex 36504-35736-34969 and Nifty 11069-10856-10643. 38.2% Retracement level of the Immediate Rally along with Golden Ratio forms a strong first Confluence Support Zone between Sensex 37199-37038 and Nifty 11247-11245. Second Confluence Support Zone is between Sensex 36646-36504 and Nifty 11089-11069.

 

This week saw testing of the strong daily as well as weekly Bullish Gap between Sensex 38050-38022 and Nifty 11499-11486. It provided strong Support to the indices before bouncing back. The current Rally has seen two more Bullish Gaps which have resulted in higher bottom formations. A break of the above mentioned Bullish Gap will lead the market down to test second Bullish Gap between Sensex 37643-37582 and Nifty 11370-11368. The first Bullish Gap is at Sensex 37131-37061 and Nifty 11210-11185, which is an extremely strong Support for the market.

 

Both Sensex and Nifty completed a Rounding Bottom formation and the Target as per that pattern falls at Sensex 40403 and Nifty 12391. Also both the indices had completed a Bullish Cup and Handle pattern which has a target of Sensex 39503 and Nifty 11907. The above targets will be achieved as long as Sensex remains above 34937 and Nifty above 10557.

 

This week, both the indices tested the short term average of 20dma (Sensex – 38246 and Nifty – 11549) before bouncing back. Both the indices continue to remain well above the medium term average of 50dma (Sensex – 37236 and Nifty – 11245) as well as the long term average of 200dma (Sensex – 35074 and Nifty – 10709). Thus the trend in short term timeframe still remains up, whereas the trend in medium term as well as long term time-frame remains Bullish.

 

MACD is in Sell mode whereas Price ROC is still positive and in Buy mode. RSI (58) suggests bullish momentum. Stochastic Oscillator %K (39) is above %D and hence in Buy mode. ADX has reduced to 32, suggesting that the Uptrend is under consolidation. Directional Indicators continue in Buy mode as +DI is above –DI. MFI (54) suggests Positive Money Flow. OBV is making higher top higher bottom formation. Buy Signal in Bollinger Band has been negated. Thus majority of Oscillators still suggest bullish bias.

 

Options data for September series indicate highest Call Open Interest is at the strike of 11800 whereas the highest Put build-up is at the strike of 11500. Thus Options data suggests a narrow trading range with resistance at 11800 & support at 11500.


THIS WEEKS RECOMMENDATIONS:


STOCK

CMP

SL

Tgt-1

Tgt-2

Buy DrReddy

2632

2575

2719

2809

Buy AxisBank

645

631

666

689

Buy GujFluoro

861

843

889

919

Buy TataMotors

277

271

286

296

Buy Vedanta

230

225

238

247


INDEX LEVELS:


 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

11294

11393

11499

11589

11678

11760

11881

Sensex

37319

37643

38022

38389

38736

39076

39416

 

WATCH OUT FOR:

 

Dr Reddy Double Bottom
 
Tata Motors

 

 

 

 

 

 

 

 

 

 

 

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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