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The Markets yesterday remained in a capped range, moving in either direction and ended the day with moderate gains, and in the process have formed a lower top and slightly lower bottom on the Daily High Low Charts.
Today, we expect the Markets to first open on a sluggish and moderately negative note and then expect it to improve as the session progresses. This will critically depend upon the trajectory that it forms and it would be important for the Markets to stay in positive intraday trajectory.
With the Markets expected to open on a moderately negative note, the levels of 5420 and 5445 shall act as resistance and the levels of 5350 shall act as support. All lead indicators continue to remain in place. The RSI—Relative Strength Index on Daily Chart is 36.6167 and it does not show any negative divergence or failure swing and is therefore neutral. The Daily MACD continues to tradebelow its signal line.
At this point, we would like to pick up from where we left yesterday. We have categorically mentioned in our Thursday’s edition that the Markets are witnessing unnatural behavior and is getting unnaturally influenced through few big players (FIIs) in significant absence on retail participation. Also, in our Yesterday’s edition, we have also mentioned that the Markets are showing reluctance on the downside. Continuing from there, again the F&O data shows huge addition of shorts (large increase in OI), and the PCR near 0.80 which is the OVERSOLD zone. We continue to feel that the markets may remain erratic with movements on either side but the down side remains limited, though we may continue to see erratic behavior on low volumes due to rollover activities. We continue to advice to strictly refrain from shorts and use the weaker openings to make selective purchases. Overall, cautious optimism is advised.
As mentioned, the Markets had an utterly disappointing session yesterday as it not only saw a gap down opening but also remained under pressure for the entire session to end the day with deep cut and in the process have formed a lower top and lower bottom on the Daily High Low Charts.
Today, expect theMarkets to open flat and look for directions and most probably we may again see some respite from the downside and weakness that we saw yesterday.
At this juncture, we wish to highlight certain important points. The Markets have been behaving in most artificial and unnatural manner, especially in last couple of session, in defiance of technicals. For example, the Markets had shown very clear signs of reversal on Friday and it had no reason at all, technical or what so ever, to have a gap down opening yesterday. The gap down openings, and the moving of markets in pre-decided range very clearly shows the Markets are controlled by few big players with total absence of retail participation. Further proof of this is that on the Technical Charts, we typically see reluctance of the lead indicators. For example, the RSI on Daily Chart is 35.8155. Though Markets have formed its 14-day low, the RSI has not. This is BULLISH DIVERGENCE.Further, the short term moving averages have reported a positive cross over. Thus, the charts are certainly saying that the behavior of the Markets is more of speculative nature, somewhat in defiance of technicals. Though it I sad that the Retail Investors continue to suffer from speculative activities of few bit players, for today, we strongly advice to continue to refrain from short positions. We may continue to see such erratic behavior in the Markets owing to expiry week, we advice to cautiously use this dips for making fresh selective purchases.
The Markets attempted to bottom out on Friday as it staged a smart pullback and ended the day with gains, though slightly off its highs, has formed a higher top and higher bottom on the Daily High Low Charts.
Today, though the Markets ended the day near their highs on Friday, is expected to open on a negative note following weak closing of US Markets and weaker Asian Markets in the morning.
Thus, expect the Markets to open on a lower note and find directions. With the Markets expected to open negative, the levels of 5510 and 5535 shall act as resistance and the levels 5440 and 5415 shall act as supports.
All lead indicators continue to remain in place. The RSI—Relative Strength Index on daily charts is 41.7001 and is neutral as it shows no failure swings or negative divergence. The Daily MACD, though continues to trades below its signal line, is improving. On the Weekly Charts, the RSI is neutral as it shows no negative divergence or failure swings.
Having said these there are some positives that are seen. First, the Stochastic Oscillators on Weekly Chart is in OVERSOLD Position. Secondly, the 50DMA and 100 DMA on Daily Chart has shown positive cross over which is a short term positive. Also, addition of Open interest with rise signifies short covering replaced with some fresh longs.
All and all,even with weak opening, chances of improvement seen as the session progresses. There are chances that the Markets may see negative opening, and remain negative on temporary basis showing volatility this being expiry week, but no major technical triggers are seen on the down side. It is strongly advised to avoid shorts and use dips for making selective purchases. Overall range bound day expected and thus positive caution advised.