The market corrected last week after the spectacular rally and more than two weeks of consolidation. The fall took support at the strong support zone of 6650-6665. The correction will intensify as and when the support is breached further correction will take place.
At the same time the Nifty opened the week at 6778, made a high of 6786, low of 6656 and closed the week at 6694. Thus the Nifty closed the week with a loss of 88 points. This week Nifty has completed a Bearish Engulfing pattern on weekly charts which is a bearish reversal pattern, with the weekly body being an Opening Black body Marubuzo. On the daily charts, Nifty has formed a small black body candle which can be an Inside day. Thus both daily as well as weekly charts suggest a continuation of bearish bias in the near term.
The Fibonacci retracement of the move from 6432 to 6869 has support at 6702-6651-6599. The 50% Retracement level coincides with the intermediate bottoms at 6665 & 6650. Thus the market has a strong Support Zone between 6665-6650. If and when this support zone is breached conclusively the correction of higher degree i.e. of the move 5933 to 6869 will start. The relevant Correction levels for the 5933-6869 move are 6512-6401-6291.
Nifty has completed a Bullish Flag pattern when Nifty closed above 6562. The pattern has a potential targets lies at 6915 and 7190. These targets remain valid till Nifty trades above the intermediate low of 6432. The market has a Bullish Upward Gap at 6413-6403. This Bullish Gap has been tested when the markets moved from 6432 to 6869. Thus on any correction this gap will act as strong support. As per the Gap theory this Measuring Gap provides the target of 6886, Which has been more or less been achieved this week. The market has completed a six year consolidation on the monthly charts. The potential target of this pattern at 10480 remains valid till 6350 is not breached conclusively. On the long term investing front the market is buy on dips. This rally started from a low of 5933 and hence this bullish rally remains valid till the market stays above the 5933 levels.
Nifty has closed below the short term average of 20dma (6749), however it continue to remain above the medium term average of 50dma (6529) and the long term average of 200dma (6133). Thus the trend in the short term has turned bearish whereas the trend in the medium term and the long term time frame continues to remain bullish. The 61.8% retracement of 5933-6869 move at 6512 and the 50DMA for a strong confluence of support.
RSI @51 has reduced and is now just bearly hanging by its teeth to the equilibrium line. MFI @42 has dropped below the center line suggesting money flowing out of the market. Stochastic Oscillator %K is in Sell mode as it is below %D. ADX @27 has reduced suggesting that the uptrend has lost lot of its strength. The Directional Indicators are in Sell mode as +DI has gone below -DI. OBV too has started making lower top lower bottom formation. Buy signal in Bollinger Band now stands cancelled as the prices have closed below the mean of Bollinger Band. Thus Oscillators are suggesting a bearish bias in the near term.
Open Interest Put Call Ratio O.I.PCR for the May series is at a reduced level of 1.14 which indicates the market is now in a balance. Highest Open interest build up is seen at 7000 Call and 6500 Put. This suggests that the market expects a trading range with support at 6500 levels and resistance around 7000 levels. Friday saw strong Put build up in 6400 strike. This suggests that the zone between Nifty 6500 to 6400 is likely to act as strong support.
Stock of the Week:
Jain Irregation:
The stock has been moving in a steady range of 45 and 75 range for the past 15 months. As shown above the stock has formed a Inverted Head & Shoulders pattern on the weekly charts. The breakout appears on the back of large spurt in the volume. The dormant RSI has also broken past its resistance of 60 levels. The stock should be bought with stop loss of 69 for the medium term target of 105. For short term the stock can be bought on declines to 75 with the 71.5 as stop loss and 95-100-105 as target.
At the same time the Nifty opened the week at 6778, made a high of 6786, low of 6656 and closed the week at 6694. Thus the Nifty closed the week with a loss of 88 points. This week Nifty has completed a Bearish Engulfing pattern on weekly charts which is a bearish reversal pattern, with the weekly body being an Opening Black body Marubuzo. On the daily charts, Nifty has formed a small black body candle which can be an Inside day. Thus both daily as well as weekly charts suggest a continuation of bearish bias in the near term.
The Fibonacci retracement of the move from 6432 to 6869 has support at 6702-6651-6599. The 50% Retracement level coincides with the intermediate bottoms at 6665 & 6650. Thus the market has a strong Support Zone between 6665-6650. If and when this support zone is breached conclusively the correction of higher degree i.e. of the move 5933 to 6869 will start. The relevant Correction levels for the 5933-6869 move are 6512-6401-6291.
Nifty has completed a Bullish Flag pattern when Nifty closed above 6562. The pattern has a potential targets lies at 6915 and 7190. These targets remain valid till Nifty trades above the intermediate low of 6432. The market has a Bullish Upward Gap at 6413-6403. This Bullish Gap has been tested when the markets moved from 6432 to 6869. Thus on any correction this gap will act as strong support. As per the Gap theory this Measuring Gap provides the target of 6886, Which has been more or less been achieved this week. The market has completed a six year consolidation on the monthly charts. The potential target of this pattern at 10480 remains valid till 6350 is not breached conclusively. On the long term investing front the market is buy on dips. This rally started from a low of 5933 and hence this bullish rally remains valid till the market stays above the 5933 levels.
Nifty has closed below the short term average of 20dma (6749), however it continue to remain above the medium term average of 50dma (6529) and the long term average of 200dma (6133). Thus the trend in the short term has turned bearish whereas the trend in the medium term and the long term time frame continues to remain bullish. The 61.8% retracement of 5933-6869 move at 6512 and the 50DMA for a strong confluence of support.
RSI @51 has reduced and is now just bearly hanging by its teeth to the equilibrium line. MFI @42 has dropped below the center line suggesting money flowing out of the market. Stochastic Oscillator %K is in Sell mode as it is below %D. ADX @27 has reduced suggesting that the uptrend has lost lot of its strength. The Directional Indicators are in Sell mode as +DI has gone below -DI. OBV too has started making lower top lower bottom formation. Buy signal in Bollinger Band now stands cancelled as the prices have closed below the mean of Bollinger Band. Thus Oscillators are suggesting a bearish bias in the near term.
Open Interest Put Call Ratio O.I.PCR for the May series is at a reduced level of 1.14 which indicates the market is now in a balance. Highest Open interest build up is seen at 7000 Call and 6500 Put. This suggests that the market expects a trading range with support at 6500 levels and resistance around 7000 levels. Friday saw strong Put build up in 6400 strike. This suggests that the zone between Nifty 6500 to 6400 is likely to act as strong support.
Stock of the Week:
Jain Irregation:
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