As mentioned in the Nifty Daily for 4th April 2014 the market tumbled down to close below the 6700 levels. Market has been moving up for past eight sessions and saw the last two days of week profit booking from investors. The market has given a 6 year consolidation breakout and has a very big target. Hence the declines provide good investment opportunity.
Nifty opened the week at 6723, made a high of 6776, low of 6662 and closed the week at 6694. Thus the Nifty closed the week with a minor loss of 1 point. On the weekly charts, Nifty has formed a small black bodySpinning Top which is a neutral formation. On the daily charts it has formed an opening Black body Marubuzo which indicates bearishness. Hence both daily as well as weekly charts suggest a pause in the ongoing rally with a slight bearish bias. This situation is likely to prevail till the elections, with nifty moving in a broad range.
This week the market has given a six year ascending triangle breakout on the monthly charts. The target for which lies at 10470. Last week, market completed a Bullish Flag pattern when Nifty closed above 6560. The pattern has a potential target of at least 6910 and on the higher side 7180. These targets are likely to be achieved as long as Nifty stays above 6432.
The market has left behind a Bullish Upward Gap at 6413-6403. This Bullish Gap will provide a strong support as it has been tested when market rallied from 6432 lows to 6777 highs. This Bullish Gap is a Measuring Gap and as per Gap theory the target is at 6886.
On the weekly line charts the entire move from the 4531 levels till 6777 can be seen to be perfectly channelized. The rising channel be nature has bearish implications. It can also be seen to contain a rising wedge formation with bullish bearkout given last week inside the channel. The target lies at 7325. I expect the market to consolidate in the upper trendlines of these two patterns i.e. 6777 and 6570 levels.
Current rally has started from a low of 5933. Thus a breach of 6255 (61.8% of Fibonacci retracement from 6777 till 5933) will reverse the current bullish rally. This week, Nifty managed to remain above the short term average of 20dma (6589), the medium term average of 50dma (6325) and the long term average of 200dma (6058). Thus the trend in the short term, the medium term and the long term timeframe continues to remain bullish.
MACD and ROC are both positive and continue with its Buy signal. RSI @ 70 continues to remain overbought territory since last two weeks. MFI @70 indicates positive money inflow for the market. Stochastic Oscillator is in overbought zone and has signaled a Sell as %K went below %D. ADX @ 42 has matured, suggesting that the uptrend remains very strong. The Directional Indicators continue in Buy mode as +DI continues to remain above -DI. OBV continues in Buy mode making higher top higher bottom formation. Both the indices continue with Buy signal on Bollinger Band. Since the Oscillators are in overbought territory, one can expect some weakness in the short term and if that happens, then one should use that as an opportunity to buy into the market.
The Nifty O.I. PCR is at a level of 1.31 which implies prevailing bullish bias in the market. For the April series, highest Open interest build up is seen in 6600 Put and 6900 Call. This suggests that the market trading range at 6600 levels and 6900 levels.
STOCK OF THE WEEK:
IRB Infra
The IRB infra has broken out of a falling channel on the weekly charts as shown above. The pattern target lies at 178. The stock can bought till the levels of 106 from medium term perspective for the target of 119-135.45-150 with stop loss of 98.
Nifty opened the week at 6723, made a high of 6776, low of 6662 and closed the week at 6694. Thus the Nifty closed the week with a minor loss of 1 point. On the weekly charts, Nifty has formed a small black bodySpinning Top which is a neutral formation. On the daily charts it has formed an opening Black body Marubuzo which indicates bearishness. Hence both daily as well as weekly charts suggest a pause in the ongoing rally with a slight bearish bias. This situation is likely to prevail till the elections, with nifty moving in a broad range.
This week the market has given a six year ascending triangle breakout on the monthly charts. The target for which lies at 10470. Last week, market completed a Bullish Flag pattern when Nifty closed above 6560. The pattern has a potential target of at least 6910 and on the higher side 7180. These targets are likely to be achieved as long as Nifty stays above 6432.
The market has left behind a Bullish Upward Gap at 6413-6403. This Bullish Gap will provide a strong support as it has been tested when market rallied from 6432 lows to 6777 highs. This Bullish Gap is a Measuring Gap and as per Gap theory the target is at 6886.
On the weekly line charts the entire move from the 4531 levels till 6777 can be seen to be perfectly channelized. The rising channel be nature has bearish implications. It can also be seen to contain a rising wedge formation with bullish bearkout given last week inside the channel. The target lies at 7325. I expect the market to consolidate in the upper trendlines of these two patterns i.e. 6777 and 6570 levels.
MACD and ROC are both positive and continue with its Buy signal. RSI @ 70 continues to remain overbought territory since last two weeks. MFI @70 indicates positive money inflow for the market. Stochastic Oscillator is in overbought zone and has signaled a Sell as %K went below %D. ADX @ 42 has matured, suggesting that the uptrend remains very strong. The Directional Indicators continue in Buy mode as +DI continues to remain above -DI. OBV continues in Buy mode making higher top higher bottom formation. Both the indices continue with Buy signal on Bollinger Band. Since the Oscillators are in overbought territory, one can expect some weakness in the short term and if that happens, then one should use that as an opportunity to buy into the market.
The Nifty O.I. PCR is at a level of 1.31 which implies prevailing bullish bias in the market. For the April series, highest Open interest build up is seen in 6600 Put and 6900 Call. This suggests that the market trading range at 6600 levels and 6900 levels.
STOCK OF THE WEEK:
IRB Infra
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