Dark cloud stalls near-term bull run
Last week, the Sensex opened at 32361.36, registered a high at 32524.10 and moved to a low at 31886.09 before it closed the week at 31922.43 and thereby showed a net fall of 350 points on a week-to-week basis. A Dark Cloud Cover candlestick pattern was formed at the end of the week after testing the resistance/supply zone, which suggests that a possible near-term short reversal is likely to be in place unless an immediate breakout and close above 32686 is witnessed with a bullish candle.
After the peak of 32686, the Sensex fell to 31128, which took 7 trading days. The rise from 31128 to 32524 took
25 days, which is typically a B structure. As a result of the fall on the daily chart, a C structure is likely now.
The lower top at 32422 was formed on 19/09/2017 followed by In Day on 20/09/2017. Post in Day, the 2-day high/low is critical for the next directional movement. After testing the supply zone of 32394-32686 and In Day structure, the 2-day high/low of post In Day becomes critical.
A breakdown below the 2-day low triggered the fall on Thursday and Friday. A large bearish candle on Friday makes a mark since Thursday saw a mild recovery from the low of 32164 and it violated the same on Friday for a downside trigger. The C structure lower level could be as low as 32339 - 30952 for the near-to-short-term.
Dark Cloud Cover last week is indicative of a possible lower top against the top of 32686. Support will be at 31797-31560.
A fall and close below 31560 can lead to 31128. Resistance will be at 32110-32335-32524.
July and August 2017 witnessed two equal monthly ranges in the opposite directions but September got stuck in the range.
The band is 32686 to 31017 and October will look for the next directional movement outside the band. At the higher level, resistance and profit-booking will continue till 32686 is not crossed. Monthly chart support point will be 31128-31017-30680.
Support on the quarterly chart will be at 31522-31017-30921 and on deeper correction, support will protect the slide.
Trend based on Rate of Change (RoC) Daily chart:
1-Day trend - Down 3-Day trend - Down
8-Day trend - Down
1-Week trend - Down 3-Week trend - Up 8-Week trend - Down
1-Month trend - Up 3-Month trend - Up 8-Month trend - Up
1-Quarter trend - Up 3-Quarter trend - Up 8-Quarter trend - Up
1-Year trend - Up 3-Year trend - Up 8-Year trend - Up
BSE Mid-Cap Index Weekly chart:
1-Week trend - Down
3-Week trend - Down
8-Week trend - Up
An Engulfing Bear candlestick pattern stalls the rise of the
BSE Mid-Cap index.
A further rise is above 16183 and traders may use the intra-week rise to exit long and book profits.
The lower level of 14905 could be tested, which is the Weekly Reversal Value (WRV). In the past, we have seen correction hitting the WRV before recovering to a new high.
BSE Small-Cap Index Strategy for the week
1-Week trend - Down
3-Week trend - Up
8-Week trend – Up
An Engulfing Bear candlestick pattern stalls the rise of the BSE Small-Cap index. Support will be at 16145-15873. A deeper correction is below 15873 and in that case, it will hit the WRV, which is at 15441. Profit-booking is broadly suggested for the Sensex and Sensex-related stocks in the resistance/supply zone of 3241232686. The high registered last week was 32524 and profit-booking pressure was witnessed and intensified on Friday to a low of 31886.
As a result of the Dark Cloud Cover candlestick pattern, traders long can exit on a rise to the resistance range of 3211032335 with a stop loss of 32686.
Expect 31128 to be tested with volatility. Trade long on index only on a breakout and close above 32686 and Sensex stocks which make 52 week highs. Exit long and book profits in the rest of the stocks till a new high is not registered or on a substantial oversold condition on the weekly or monthly charts.