Daily Market Trend Guide -- Friday, August 05, 2011

MARKET TREND FOR TODAY

The Markets yesterday performed in quite disappointing manner as after trading in a capped range it weakened further in the second half of the session to end yet another day with losses. In this process, it has formed slightly higher top but sharply lower bottom on the Daily High Low Charts.

Today’s session is likely to be a kind of acid test for the Markets. The prevailing global weakness is likely to cause a gap down opening in the Markets today.

Thus, we can expect the Markets to have a gap down opening today and open significantly lower on weak global cues. With such weak opening expected, the levels of 580 and 5240 are likely to act as supports. For next sessions to come, the levels of 5440-5450 have now become immediate resistance levels.

The RSI—Relative Strength Index is 34.6701 and is does not show any negative divergence. However, it has reached its lowest value in last 14-days which is Bearish. The Daily MACD continues to trade below its signal line.

Having said this, it is important to note the following. With today’s expected weak opening included, the Markets would have lost around 450+ points or around 8% in last eight sessions and have added significant amount of Open Interest. Also, the volumes have remained lower side, relatively. Secondly, On Candles, An Engulfing Bearish Line has occurred. IF Engulfing Bearish Pattern occurs during downtrend, like in case of NIFTY, it implies a POTENTIAL REVERSAL.

All and all, from the above reading, the Markets will have weak opening but there are all chances that it may spend the day improving in the rest of the session.

It is thus advised to maintain patience without panic and strictly avoid shorts while holding on the existing positions and making selective purchases. A cautious outlook is advised with bias towards improvement as the day progresses. 

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