Archives : TRAPPED IN A BEAR STORM - 05/10/2018.

     TRAPPED IN A BEAR STORM - 05/10/2018.

 

2008 – FEAR MEMORIES ARE BACK.

The genesis of current Correction lies not in the happenings now but the seeds were laid in the Correction of January 2018. That time the Correction was stopped abruptly and the indices went on to create fresh highs but interestingly that rally was limited to just a handful of index heavyweights, whereas the broader market hardly showed recovery. This is the second leg of Correction which is taking majority of the market down, the current culprits being rising Crude, crashing Currency and a very helpless Government and its team of clueless Bureaucrats. This is reminiscent of the Correction of 2008 where the broader market crashed in two phases, first being the January one, followed by October crash which was the last but most brutal leg of the fall.

 

WHAT TO EXPECT NEXT?

Last week was brutal to say the least as the market went down dramatically crashing through the Supports with ease. Fall of around 600 Nifty points in just two days indicates that this is not a normal Correction but a strong reversal in Trend. Strong Trendline Support is seen at Nifty 10255. A break of this Support will lead the market down to the confluence Support zone of Nifty 9875-9827. A dead cat bounce from the Trendline Support cannot be ruled out as the market is now in oversold territory. The bounce can lead to maximum level of Bearish Gap 10754-10843, which will act as strong Resistance zone.


TRAPPED IN A BEAR STORM - 05/10/2018.

 

2008 – FEAR MEMORIES ARE BACK.

 

The genesis of current Correction lies not in the happenings now but the seeds were laid in the Correction of January 2018. That time the Correction was stopped abruptly and the indices went on to create fresh highs but interestingly that rally was limited to just a handful of index heavyweights, whereas the broader market hardly showed recovery. This is the second leg of Correction which is taking majority of the market down, the current culprits being rising Crude, crashing Currency and a very helpless Government and its team of clueless Bureaucrats. This is reminiscent of the Correction of 2008 where the broader market crashed in two phases, first being the January one, followed by October crash which was the last but most brutal leg of the fall.

 

WHAT TO EXPECT NEXT?

 

Last week was brutal to say the least as the market went down dramatically crashing through the Supports with ease. Fall of around 600 Nifty points in just two days indicates that this is not a normal Correction but a strong reversal in Trend. Strong Trendline Support is seen at Nifty 10255. A break of this Support will lead the market down to the confluence Support zone of Nifty 9875-9827. A dead cat bounce from the Trendline Support cannot be ruled out as the market is now in oversold territory. The bounce can lead to maximum level of Bearish Gap 10754-10843, which will act as strong Resistance zone.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 36274, made a high of 36616, low of 34202 and closed the week at 34376. Thus it closed the week with a loss of 1851 points. At the same time the Nifty opened the week at 10930, made a high of 11035, low of 10261 and closed the week at 10316. Thus the Nifty closed the week with a loss of 614 points.

 

On the daily charts, both Sensex and Nifty have formed Three Identical Black Crows on an ongoing downtrend. Each day was a bearish Gap down opening followed by big Opening Black body Marubuzo indicates that Bulls have been mercilessly butchered. On the weekly charts, both the indices have completed Three Identical Black Crows. As a result of big body candles and formation of Identical Three Black Crows, the momentum oscillators are in oversold zone and hence a Pull-Back can be expected, after which the downward momentum should take over. Thus daily as well as weekly candlestick formations are suggesting a strong Bearish Bias.

 

On Thursday the market fell leaving behind a Bearish Gap between Sensex 35820-35911 and Nifty 10754-10843. Going forward this Gap will act as strong Resistance and can have the strength to end any sort of Pull-Back. This Gap is also a Bearish Measuring Gap which will have a target of Sensex 32742 and Nifty 9837.

 

Intermediate Correction levels are placed at Sensex 33920-32354-30788 and Nifty 10283-9827-9371. Higher degree Correction levels are placed at Sensex 32688-30742-28796 and Nifty 9875-9293-8710. Thus we have two confluence zones which will act as Support Zones. First Confluence Support Zone is between Sensex 32688-32354 and Nifty 9875-9827. Second Confluence Support Zone falls between Sensex 30788-30724 and Nifty 9371-9293.

 

The Bears were merciless this week and the indices have halted on Friday at the Trendline Support of Sensex 34041 and Nifty 10255. A break of this Trendline Support will lead the indices to test the first confluence zone of Sensex 32688-32354 and Nifty 9875-9827.

 

This week, both the indices breached and closed well below the long term average of 200dma (Sensex – 35367 and Nifty 10779). Both the indices are well below both the short term average of 20dma (Sensex – 36936 and Nifty – 11151) as well as medium term average of 50dma (Sensex – 37486 and Nifty 11321). Thus the trend in short term as well as medium term timeframe is bearish, whereas the trend in the long term time-frame has now turned Bearish.

 

MACD and Price ROC are both negative and in Sell mode. RSI (21) and Stochastic Oscillator %K (04) are in Sell mode but extremely oversold. ADX is now at 41, suggesting that the Down Trend is now maturing. Directional Indicators continue in Sell mode as +DI is below –DI. MFI (19) suggests Negative Money Flow besides being in oversold territory. OBV is making lower top lower bottom formation. Bollinger Band continues with its Sell signal. Thus Oscillators are suggesting a bearish bias, with momentum oscillators being oversold.

 

Options data for October series indicate highest Call Open Interest is at the strike of 11000 whereas the highest Put build-up is at the strike of 10000. Thus Options data suggests a wide trading range with resistance at 11000 & support at 10000.


INDEX LEVELS:


 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

9928

10049

10195

10316

10447

10618

10754

Sensex

32972

33371

33865

34376

34833

35383

35820


THIS WEEKS RECOMMENDATIONS:


STOCK

CMP

SL

Tgt-1

Tgt-2

Sell HDFC

1709

1744

1656

1601

Sell Lupin

839

856

813

786

Sell BharatForge

577

589

559

540

Sell Zee Ent

422

432

407

391

Sell ChennaiPetro

256

262

247

237


WATCH OUT FOR:

 

Nifty Confluence Support Zone
 

 

 

 

 

 

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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