Special Edition -- Daily Market Trend Guide -- Friday, May 06, 2011

A SPECIAL NOTE – DAILY MARKET TREND GUIDE – FRIDAY, MAY 06,, 2011

The day when the Markets were expected to stabilize, the Markets opened  positive but traded in a very capped range for almost late afternoon trade. Just when it seemed that we may have a range bound directionless day, weakness crept in again and the Markets saw a sudden unexpected wave of weakness again and closed with losses on the 9^th straight day to close at 5459.85.

We draw attention to few points at this juncture.

As mentioned in our previous editions of Daily Market Trend Guide, the Markets have completely disregarded major pattern supports, and all of its DMAs as if they have never existed before. The Markets (NIFTY) has fallen 424.85 points or 7.44% in last 9 sessions out of which over 50% (241.45 points or 4.29%)  came in last three sessions when the Markets were anyway below its DMAs and had given a potential bottoming out signs.

It is important to note that the relentless selling and thereby underperformance that we have been seeing tends to continue sometimes which is beyond any technicals and therefore, all lead indicators but at a time, technicals finally takes over. In between these time, there is little that an analyst, whether technical or fundamental can do if the Markets behaves as if there are no patterns, no pattern supports, no DMAs, etc.

So far as today is concerned, it is grossly overdue that we see some respite from the weakness that we have been seeing in last 9 sessions. The Markets are expected to open on a positive note today. The negatives in global markets may not effect much as we have anyway grossly underperformed as compared to them.

Following positive opening, it would be critically important for the Markets not to trade in directionless manner as it did yesterday until late afternoon trade. It would be critically important for the Markets to remain in rising trajectory to capitalize on positive opening that it is likely to get today. The levels of 5510 and 5575 are immediate resistance and the levels of 5350 is the immediate support on the Charts.

However, all lead indicators are now Oversold. The RSI—Relative Strength Index on Daily Chart is 29.5024 which is OVERSOLD. It gives no negative divergence. On the Candles, there is a potential sign of Markets bottoming out today, however it needs confirmation in form of a higher bottom today.

Also, NIFTY PCR has dropped below 0.80 which also is OVERSOLD.

Given the fact that  the Markets have fallen 424 points in last 9 sessions it just now remains a matter of time before it give a technical pullback, which is long and grossly overdue, especially given the facts that all indicators now point towards Markets being OVERSOLD.

It is again continued to be advised to refrain from shorting and selective fresh purchases may be made. The Markets have shown all the signs of some stability and a possibility of a pullback. Positive caution is advised for today.

Milan Vaishnav, 

Consulting Technical Analyst,
www.MyMoneyPlant.co.in
+91-9825016331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com