WEEKLY TECHNICAL VIEW 171011

TECHNICAL VIEW FOR THE WEEK AHEAD BASED ON WEEKLY CHARTS  DATED 14-10-2011 :

We are on track yet again but this time it was a bull rally for the whole week which we did not miss.

We have been very categorical in our view that there can be a very sharp bear market rally and we were waiting for certain clear evidences and these were,

TECHNICAL :

1.       chance of a price pattern

2.       Positive divergence in momentum indicators

3.       Reversal candle pattern

Psychological :

1         News flow plays an important role in identifying TIMING of any price reversal

2         Judgement of traders /media sentiment plays a key role I technicals.

We found a small FALLING WEDGE on indices chart which can be a reversal pattern and there was a potential of a DOUBLE BOTTOM around 4720 in NIFTY we also presented a NIFTY chart which clearly showed a POSITIVE DIVERGANCE with its MACD and last there was a potential candle reversal pattern called DRAGONFLY DOJI  and one important index BANK NIFTY did reach our down side target which was a strong support too.

On psychological front when NIFTY closed at 4756 traders would have firmly believed that it will breach 4720 as there was very bad news flow like rating of SBI was cut and there was fear of Greece and Italy default and media was strongly BEARISH.

All these was enough for us to call it a SIGNIFICANT BOTTOM and for our readers we said clearly that a close above 4924 will confirm a strong bottom in place and we did give targets of 5156-5225-5340 for nifty early in the last week.

Just to take a pleasant note here is what we said in our WEEKLY CHART BOOK on 5^th September 2011:

“We will have two options :

SENSEX AND NIFTY will make a higher bottom above their most recent lows of 15765 and 4720 respectively and we will see ANOTHER BULLISH CANDLE REVERSAL pattern on weekly charts

Or

SENSEX and NIFTY will go a shade below their recent lows (remember that we had already suggested very high chances of A SIGNIFICANT rally from around 15300-4538 levels) momentum indicators will have POSITIVE DIVERGANCE ON DAILY CHARTS  and then markets can have one significant up side rally.

In the second option too SENSEX and NIFTY will make another CANDLE REVERSAL PATTERN on weekly charts.

It is clear in both possibilities that we will see ATLEAST one more down side leg in coming days BUT already there is some real buying interest being seen in SELECTIVE stocks like reliance which suggests that we should take care in shorts for some time now.”

SENSEX went down a shade below 15765 and NIFTY remained up a little there was a chance of DOUBLE CANDLE REVERSAL PATTERN as we found a DRAGON FLY DOJI and there was a clear POSITIVE DIVERGANCE on daily chart so what we said a month ago came as true on charts.

NOW WHAT ?

As we said earlier we have now a strong close above 5034 and 16756 for NIFTY and SENSEX respectively so ideally every dip is a buying opportunity strong support for NIFTY is at 4991-4967 levels and 5045 is also an important support so slow down side correction would be to enter long with  SAR at 4967 and on the upside NIFTY will face some resistance around 5177-5196 which is 17200-17415 for SENSEX .

There are very bright chances that after a brief correction NIFTY and SENSEX will reach 5225-5340 and 17800 levels in a couple of weeks time.

Do remember that these kind of rallies can be BEAR MARKET rallies only so we will have to be very selective in stock picking and at any hint of weakness on daily charts one should be prepared to exit longs so for longs 4965 is a good SAR level as on today.

5177-5196 has been the key REVERSAL zone established on daily & weekly charts of NIFTY so there will be some efforts from bears around 5200 and so there will be a down side correction and even if NIFTY breaches 5177-5196 and SENSEX closes above 17200-17315 for a day care should be taken for longs for the short term.

A HEALTHY correction which should remain slow up to around 5045 and 4991 can be used to enter long .

Three consecutive close above 5177-5196 zone can trigger some real short covering  even before any correction takes place which than can take NIFTY up to our upper targets.

BANKING STOCKS :

In our WEEKLY CHART BOOK last week we clearly said that BANKING STOCKS looks to have hit a significant bottom and during the last week many active bank stocks generated an up move of 5-8% points.

A few other banks looks to be poised for further upside in coming days

a   " v " shape recovery and fibbonacci magic in which 1.618%  retracement of one leg matches 38.2% retracement of a big down leg.a  break above 11320 can take cap good index  to 11852 and 12315