On the back of the Iraqi crisis the market has started its much awaited correction. The main concern being the interruption of Crude oil supply, global market saw 12% rise in crude oil prices in last 3 days. For a healthy bull market corrections are like Viral Injection shots. The correction will be a great leveler as the weak hands which have entered the market wanting quick money will be driven out, and value stocks will attract strong buying interest at lower levels. Nifty started its correction from the target mentioned for the Flag pattern which was at 7705 and Nifty reversed from a high of 7700, hence the Correction was not entirely unexpected.
Nifty opened the week at 7621, made a high of 7700, low of 7525 and closed the week at 7542. Thus the Nifty closed the week with a loss of 41 points. Nifty formed a Hanging Man pattern at the top on Tuesday which is a bearish reversal pattern. The pattern got confirmed on the next day but the impact of this pattern was felt on Friday when both the indices made a big Opening Black body Marubuzo. Interestingly, the weekly charts have seen a small black body formation which is not exactly a bearish pattern. Thus Candlestick analysis point towards bearishness in the immediate term, but the view is not so bearish in a higher timeframe chart. Nifty achieved its daily as well as weekly Bullish Flag pattern target which was at 7705. In the short term timeframe, the support for Correction of the immediate rise from 7118 to 7700 lie at 7477-7409-7340 for the Nifty.
The market while moving higher in the current rally, has left behind two Bullish Rising Gaps which will act as strong supports. The first gap between 7497-7484 is also coinciding with 38.2% Retracement of the immediate Correction levels mentioned above (7477), thus forming a strong confluence Support zone between 7497-7477. One can expect some fight from the bulls to protect these levels. If this Support zone gets breached, then one can expect the Correction to intensify and the indices to move lower towards the next Support zone which is the second Bullish Rising Gap between 7067-7020. This is a stronger Support zone as it coincides with 61.8% Retracement level 7044 of the Nifty rise from 6638. Hence the current uptrend will reverse only if this support zone gets breached.
When the market overcame the previous top and made fresh lifetime highs, it marked the end of six year consolidation. On the weekly charts Nifty has completed a Bullish Saucer formation and the targets as per that will fall at 8145 which are likely to be achieved within a period of next 20 months.
Nifty is way above the short term average of 20dma (7413), the medium term average of 50dma (7048) and the long term average of 200dma (6356). Thus the trend in the short term, medium term and the long term timeframe continues to remain bullish.
RSI is at 65 but it has exhibited negative divergence of the first degree. Stochastic Oscillator continues to remain overbought and has given a Sell signal as %K is below %D. MFI has reduced to 60, suggesting that the money inflow has reduced. OBV is not yet confirming with the price movement. The Directional Indicators continue in Buy mode as +DI is above –DI. Bollinger Band is still to negate the buy signal. ADX has gone up further and is now at a level of 54 which suggests that the strength of the current uptrend is very high but the trend is now maturing. Hence it is suggested to be cautious as some correction in the current uptrend can be expected.
Volatility Index India VIX, has bounced to around 17 from a lower level of 13. One can expect a breakout in the VIX index if it closes above 22. It will pave the way towards a level of 28. Highest Put writing is seen at the strike of 7500 and highest Call writing is at the strike of 7800. Thus market is expected to trade between 7500 and 7800. Friday saw high amount of Call writing at the strike of 7600 which can be expected to act as an immediate resistance level.
Stock of The Week
United Breweries Ltd.
The stock has been consolidating in a narrow range of 856 and 710. On the weekly charts as shown below it has broken down from the trianular consolidation. The target for the stock is at 602 with the stop loss of 755. For the short term the stock can be sold for the stop loss of 740 on closing basis, for the taret of 688-665
Nifty opened the week at 7621, made a high of 7700, low of 7525 and closed the week at 7542. Thus the Nifty closed the week with a loss of 41 points. Nifty formed a Hanging Man pattern at the top on Tuesday which is a bearish reversal pattern. The pattern got confirmed on the next day but the impact of this pattern was felt on Friday when both the indices made a big Opening Black body Marubuzo. Interestingly, the weekly charts have seen a small black body formation which is not exactly a bearish pattern. Thus Candlestick analysis point towards bearishness in the immediate term, but the view is not so bearish in a higher timeframe chart. Nifty achieved its daily as well as weekly Bullish Flag pattern target which was at 7705. In the short term timeframe, the support for Correction of the immediate rise from 7118 to 7700 lie at 7477-7409-7340 for the Nifty.
The market while moving higher in the current rally, has left behind two Bullish Rising Gaps which will act as strong supports. The first gap between 7497-7484 is also coinciding with 38.2% Retracement of the immediate Correction levels mentioned above (7477), thus forming a strong confluence Support zone between 7497-7477. One can expect some fight from the bulls to protect these levels. If this Support zone gets breached, then one can expect the Correction to intensify and the indices to move lower towards the next Support zone which is the second Bullish Rising Gap between 7067-7020. This is a stronger Support zone as it coincides with 61.8% Retracement level 7044 of the Nifty rise from 6638. Hence the current uptrend will reverse only if this support zone gets breached.
When the market overcame the previous top and made fresh lifetime highs, it marked the end of six year consolidation. On the weekly charts Nifty has completed a Bullish Saucer formation and the targets as per that will fall at 8145 which are likely to be achieved within a period of next 20 months.
Nifty is way above the short term average of 20dma (7413), the medium term average of 50dma (7048) and the long term average of 200dma (6356). Thus the trend in the short term, medium term and the long term timeframe continues to remain bullish.
RSI is at 65 but it has exhibited negative divergence of the first degree. Stochastic Oscillator continues to remain overbought and has given a Sell signal as %K is below %D. MFI has reduced to 60, suggesting that the money inflow has reduced. OBV is not yet confirming with the price movement. The Directional Indicators continue in Buy mode as +DI is above –DI. Bollinger Band is still to negate the buy signal. ADX has gone up further and is now at a level of 54 which suggests that the strength of the current uptrend is very high but the trend is now maturing. Hence it is suggested to be cautious as some correction in the current uptrend can be expected.
Volatility Index India VIX, has bounced to around 17 from a lower level of 13. One can expect a breakout in the VIX index if it closes above 22. It will pave the way towards a level of 28. Highest Put writing is seen at the strike of 7500 and highest Call writing is at the strike of 7800. Thus market is expected to trade between 7500 and 7800. Friday saw high amount of Call writing at the strike of 7600 which can be expected to act as an immediate resistance level.
Stock of The Week
United Breweries Ltd.
The stock has been consolidating in a narrow range of 856 and 710. On the weekly charts as shown below it has broken down from the trianular consolidation. The target for the stock is at 602 with the stop loss of 755. For the short term the stock can be sold for the stop loss of 740 on closing basis, for the taret of 688-665
The stock made low of 681 on Friday 20th June
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