The market has been poised on the verge of correction for the past week, but the correction was nowhere to be seen. For the most days the market stayed in the range of 7650-7500. The market looks like it has entered in time correction mode. This week the market filled the bullish rising gap at 7480-7500 and bounced back sharply. A breach of this support zone will indicate the much awaited price correction.
Nifty opened the week at 7534, made a high of 7663, low of 7487 and closed the week at 7511. Thus the Nifty closed the week with a loss of 31 points. On Friday, Nifty has formed a small black body candle in sideways consolidation phase. On the weekly chart it has formed a small black body candle with long upper shadow. The long upper shadow indicates selling pressure at higher levels. On the weekly charts last three weeks have formed a pattern which is on the lines of Mat Hold but the key remains the formations in the coming two weeks. Thus daily as well as weekly formations point towards consolidation in the near term.
While moving higher the market had left behind two Bullish Rising Gaps out of which the first between 7497-7484 was filled this week & acted as a strong Support by supporting the market for the entire last week. This gap coincided by the 38.2% Retracement of the immediate Correction levels of 7118-7700 move. The short term average of 20dma at 7473. These together form a very strong support. A breach of this zone will intensify the price correction for the market and test of the second Bullish Rising Gap between 7067-7020, will become inevitable. This is a stronger Support zone as it coincides with 61.8% Retracement level (7044) of the Nifty move from 6638 - 7705. Current intermediate rally will derail if this Rising Gap 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 above the short term average of 20dma (7473), the medium term average of 50dma (7131) and the long term average of 200dma (6410). Thus the trend in the short term, medium term and the long term timeframe continues to remain bullish.
RSI has reduced to 58 suggesting a reduction in bullish momentum. Besides it also exhibits negative divergence of the first order. Stochastic Oscillator continues in Sell mode as %K is below %D. MFI has reduced to 55, suggesting that the money inflow has reduced. OBV has started moving lower but is yet to give a Sell signal. The Directional Indicators continue in Buy mode as +DI is above –DI. Bollinger Band continues with its Buy signal given last month. ADX is now at a level of 52 which suggests that the strength of the current uptrend is very high but the trend is now maturing. MACD continues with its Sell signal despite being positive. Hence Oscillator analysis suggests remaining cautious as some correction in the current uptrend can be expected.
India VIX, has started to move higher from the lows of 13.74 and is now around 19. A breakout above the 20 level will take the index towards the 27 level. Highest Put writing is seen at the strike of 7500 and highest Call writing is at the strike of 7700. Thus one can expect a range of the market between 7500 and 7700. On Friday, there was strong buildup in the strike of 7550 for both Calls and Puts, which suggests that the Option writers or the Strategy makers are creating Short Straddle strategy to take benefit of the remaining Time Value. This means that they expect the market to continue to be range bound till expiry.
Stock of the Week:
Canara Bank
The Stock has been consolidating in a rising channel for past one month. It has broken down the crucial support of the lower trendline on the daily charts. The pattern target lies at 347 with the stop loss of 463. For the short term the stock can be sold at 422.5 with the stop loss of 437 for the target of 412-404-390.
Nifty opened the week at 7534, made a high of 7663, low of 7487 and closed the week at 7511. Thus the Nifty closed the week with a loss of 31 points. On Friday, Nifty has formed a small black body candle in sideways consolidation phase. On the weekly chart it has formed a small black body candle with long upper shadow. The long upper shadow indicates selling pressure at higher levels. On the weekly charts last three weeks have formed a pattern which is on the lines of Mat Hold but the key remains the formations in the coming two weeks. Thus daily as well as weekly formations point towards consolidation in the near term.
While moving higher the market had left behind two Bullish Rising Gaps out of which the first between 7497-7484 was filled this week & acted as a strong Support by supporting the market for the entire last week. This gap coincided by the 38.2% Retracement of the immediate Correction levels of 7118-7700 move. The short term average of 20dma at 7473. These together form a very strong support. A breach of this zone will intensify the price correction for the market and test of the second Bullish Rising Gap between 7067-7020, will become inevitable. This is a stronger Support zone as it coincides with 61.8% Retracement level (7044) of the Nifty move from 6638 - 7705. Current intermediate rally will derail if this Rising Gap 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 above the short term average of 20dma (7473), the medium term average of 50dma (7131) and the long term average of 200dma (6410). Thus the trend in the short term, medium term and the long term timeframe continues to remain bullish.
RSI has reduced to 58 suggesting a reduction in bullish momentum. Besides it also exhibits negative divergence of the first order. Stochastic Oscillator continues in Sell mode as %K is below %D. MFI has reduced to 55, suggesting that the money inflow has reduced. OBV has started moving lower but is yet to give a Sell signal. The Directional Indicators continue in Buy mode as +DI is above –DI. Bollinger Band continues with its Buy signal given last month. ADX is now at a level of 52 which suggests that the strength of the current uptrend is very high but the trend is now maturing. MACD continues with its Sell signal despite being positive. Hence Oscillator analysis suggests remaining cautious as some correction in the current uptrend can be expected.
India VIX, has started to move higher from the lows of 13.74 and is now around 19. A breakout above the 20 level will take the index towards the 27 level. Highest Put writing is seen at the strike of 7500 and highest Call writing is at the strike of 7700. Thus one can expect a range of the market between 7500 and 7700. On Friday, there was strong buildup in the strike of 7550 for both Calls and Puts, which suggests that the Option writers or the Strategy makers are creating Short Straddle strategy to take benefit of the remaining Time Value. This means that they expect the market to continue to be range bound till expiry.
Stock of the Week:
Canara Bank
The Stock has been consolidating in a rising channel for past one month. It has broken down the crucial support of the lower trendline on the daily charts. The pattern target lies at 347 with the stop loss of 463. For the short term the stock can be sold at 422.5 with the stop loss of 437 for the target of 412-404-390.
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