Archives : TRADING RANGE BROKEN; CONVICTION MISSING - 08/02/2019

TRADING RANGE BROKEN; CONVICTION MISSING - 08/02/2019.

 

RBI OBLIGES, REPO RATE CUT BY 25BPS.

 

Just as the Market was digesting the Budget Bonanza for the Middle class and the farmers, there was another action waiting this week. After Piyush Goyal, it was now the turn of the new RBI Governor Mr. Shaktikanta Das to surprise the Market. In its maiden policy review under Mr. Shaktikanta Das, RBI cut Repo Rate by 25bps and changed its stance to ‘neutral’ from ‘calibrated tightening’. This propelled the Nifty, only for a while, to go beyond the 61.8% Trend Reversal level of 11089, only to give away the gains later. As a result, the Nifty managed the trading range breakout by closing above the 10985 after more than two months of consolidation. Nifty needs to close above 11089, only then it will move towards a short term pattern target of 11416 and Ascending Triangle pattern target of 11644. These targets are achievable as long as Nifty remains above 10583, which is the failure point. Support zone is at 10864-10720.

 


TRADING RANGE BROKEN; CONVICTION MISSING - 08/02/2019.

 

RBI OBLIGES, REPO RATE CUT BY 25BPS.

 

Just as the Market was digesting the Budget Bonanza for the Middle class and the farmers, there was another action waiting this week. After Piyush Goyal, it was now the turn of the new RBI Governor Mr. Shaktikanta Das to surprise the Market. In its maiden policy review under Mr. Shaktikanta Das, RBI cut Repo Rate by 25bps and changed its stance to ‘neutral’ from ‘calibrated tightening’. This propelled the Nifty, only for a while, to go beyond the 61.8% Trend Reversal level of 11089, only to give away the gains later. As a result, the Nifty managed the trading range breakout by closing above the 10985 after more than two months of consolidation. Nifty needs to close above 11089, only then it will move towards a short term pattern target of 11416 and Ascending Triangle pattern target of 11644. These targets are achievable as long as Nifty remains above 10583, which is the failure point. Support zone is at 10864-10720.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 36456, made a high of 37172, low of 36225 and closed the week at 36546. Thus it closed the week with a gain of 77 points. At the same time the Nifty opened the week at 10876, made a high of 11118, low of 10814 and closed the week at 10943. Thus the Nifty closed the week with a gain of 50 points.

 

On the daily charts, both the indices have formed a Real Black body candle after a gap down opening. Last three days have formed an Evening Star pattern which is a Bearish Reversal pattern. On the weekly charts, both the indices have formed a small white body candle with a longer upper shadow which indicates selling pressure at higher levels. Thus more than weekly, daily candlestick study indicates bearishness.

 

Trading Range breakout occurred in the 9th week of consolidation between Sensex 36554-35010 and Nifty 10985-10534. It was a Bullish breakout and as expected the indices went to test the 61.8% Reversal level of Sensex 36813 and 11089 for the Nifty. Only if Nifty sustains above 11089, it will achieve its short term pattern target of 11416 and Ascending Triangle target of 11644. Failure point for pattern is 10583.

 

Interestingly all the significant Moving Averages (20dma, 50dma, 100dma & 200dma) have converged into a narrow Confluence Zone between Sensex 36293-35666 and Nifty 10864-10720. This Zone will act as Strong Support Zone going forward.

 

The Correction of the current upward Retracement is at Sensex 35300-34922-35538 and Nifty 10610-10494-10379. A break below Nifty 10379, will see the intermediate Correction resuming and the 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.

 

This week, both the indices remained above all the Moving Averages viz. the long term average of 200dma (Sensex – 35973 and Nifty – 10855), the medium term average of 50dma (Sensex – 36060 and Nifty – 10817) and also the short term average of 20dma (Sensex – 36293 and Nifty – 10864). Thus the Trend in long term, medium term and short term is still Bullish.

 

MACD and Price ROC are in Buy mode. RSI (55) suggests Bullish momentum. Stochastic Oscillator %K (85) has just gone below %D and hence in Sell mode. ADX (14) suggests a further sideways consolidation with no clear trend. Directional Indicators are in Buy mode as +DI has gone above –DI. MFI (51) suggests Positive Money Flow. OBV continues to make higher top higher bottom. Bollinger Band is in Buy mode. Thus majority of Oscillators are suggesting a Bullish bias.

 

Options data for February series indicate highest Call Open Interest is at the strike of 11000 whereas the highest Put build-up is at the strike of 10400. Thus Options data suggests a narrow trading range with resistance at 11000 & support at 10400.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

10628

10722

10819

10943

11041

11145

11250

Sensex

35375

35730

36095

36546

36898

37342

37711

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy BajFinance

2707

2655

2785

2865

Buy Kotak Bank

1299

1277

1332

1366

Buy UPL

812

795

838

865

Buy Tech Mah

805

789

829

854

Buy Havells

743

728

766

790

 

WATCH OUT FOR:

 

UPL

 

 

 


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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