36000-35000 a crit­i­cal zone for Oc­to­ber

Money Times - - News -

Last week, the Sen­sex opened at 36942.71, moved to a high of 36945.50 and fell to a low of 35985.62 be­fore it closed the week at 36227.14 and thereby reg­is­tered a fall of 614 points on a week-to-week ba­sis.

Daily Chart

The ear­lier break­out points of 35993, 35877 and 35806 have halted the in­dex’s fall. The low reg­is­tered in the last 2 weeks are 35993 and 35985.

Lower range can act as sup­port as the ear­lier phase of the rally to­wards 38989 had pro­vided re­sis­tance when the in­dex con­sol­i­dated be­tween 35993 and 35806.

The Sen­sex at­tempted to make a good open­ing in the last

6 trad­ing days but failed to sus­tain at the higher range and showed an in­tra-day fall to cre­ate a bear­ish can­dle. Re­sis­tance will be at 36700-36950. Near-term re­ver­sal for a pull­back may re­sume if a break­out and close above 36950 is wit­nessed with a bullish can­dle.

A break­down for lower top and lower bot­tom will con­tinue if the Sen­sex sus­tains be­low 35800.

Weekly Chart

Weekly re­sis­tance will be at 36386-36786-36950 and lower range for the week can be 35826-34866.

Monthly Chart

Septem­ber 2018 has ended with a bear­ish can­dle and a lower high and lower low for an im­por­tant swing top. If the sup­port level of 35800 is held in Oc­to­ber 2018, then an in­tra-day month rise to­wards the re­sis­tance of the monthly chart (i.e. 37049-38112-38990) will be tested.

A fur­ther break­out and close above 38990 is es­sen­tial to save the Sen­sex from a deeper cor­rec­tion. The Monthly Re­ver­sal Value (MRV) is at 32973 and if the bear­ish can­dle con­tin­ues in Oc­to­ber 2018, then the MRV can be tested. The monthly break­out can­dle was July 2018 and its low was 35106. A clus­ter of sup­port around 35800-35000 is vis­i­ble, which could be tested if the weak­ness con­tin­ues.

Quar­ter Chart

The July-Septem­ber 2018 quar­ter is over and the Sen­sex has shown an in­verted ham­mer, which sug­gests that an up­side may be locked for the near-to-short-term putting pres­sure on sup­port clus­ters. The low recorded in July-Septem­ber 2018 quar­ter is 35106, which en­sures that 35000 will re­main crit­i­cal for open­ing up a bear mar­ket. The bear mar­ket cor­rec­tion had a time­line of 9-12 months, 9-15 months and 18-38 months. The long­est time-wise cor­rec­tion was from 1992 to 2003 and this sit­u­a­tion may not hap­pen again as a typ­i­cal char­ac­ter­is­tic of such a phase is po­lit­i­cal in­sta­bil­ity.

If the Sen­sex con­tin­ues to cor­rect, it will break the 35000 level on a sharp and sus­tained ba­sis and the cor­rec­tion could con­tinue for the next 9-12 months or 9-15 months. The Sen­sex peaked in Au­gust 2018, which means the cor­rec­tion could get into May 2019. The year 2019 is the elec­tion year and his­tor­i­cally, an elec­tion year tends to make ma­jor bot­toms for the long-term. Cor­rec­tions of such mag­ni­tude are from 25%, 38% and 55%, which can cre­ate sig­nif­i­cant dam­age and there­fore, the Sen­sex will have to stand tall from the 36000-35000 zone and cre­ate a pil­lar for con­sol­i­da­tion. Hence, Oc­to­ber 2018 can be crit­i­cal for the mar­kets as Septem­ber formed a bear­ish can­dle putting a ques­tion mark on the cur­rent rally.

BSE Mid-Cap In­dex Weekly chart:

The BSE Mid-Cap in­dex could have a tor­rid time as a re­sult of the bear­ish can­dle on the monthly chart with a lower top and break­down of the pre­vi­ous bot­tom.

The break­down is vis­i­ble and Oc­to­ber 2018 has a task in hand to save the mar­ket as the break­down im­pli­ca­tion is to­wards 13632 from the cur­rent level of 14763.

As long as the in­dex does not cross 17017, use the rise to the re­sis­tance of 15466-16313 to exit long dur­ing the week. A rise may cre­ate in­tra-day ral­lies, which may not sus­tain due to the bear­ish can­dle.

The BSE Mid-Cap in­dex will have to turn the ta­ble up­side down to re­store faith in mid-caps, which means that a rise and close above 17017 is es­sen­tial.

BSE Small-Cap In­dex Weekly chart:

A bear­ish can­dle was formed on the monthly chart and a Harami can­dle is needed for Oc­to­ber 2018 to set things right. The first ob­jec­tive re­mains to exit long and sell till 17335 is not crossed.

Strat­egy for the week

The sup­port zone of 36000-35000 will be un­der pres­sure and is crit­i­cal for Oc­to­ber 2018 and that will mark the dif­fer­ence be­tween a deeper cor­rec­tion and bear mar­ket in the off­ing. Traders who are short for the near-term may have to re­vise their stop loss down to 37000. Traders may use the rise to the re­sis­tance of 36386 to exit long and sell with a stop loss of 37000 and ex­pect 35800-35000 to be tested.

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