Tuesday, January 31, 2012

Daily Market Trend Guide -- Tuesday, January 31, 2012

MARKET TREND FOR TODAY                                                 January 31, 2012
The Markets saw its  much overdue correction creeping in perfectly in lines and as expected by us in our yesterday’s edition. The Markets opened on a negative note and remained so for the entire session. It kept itself in a negative falling trajectory for the entire session and it kept making new intraday lows. It made an intraday low of 5076.70 and ended the day at 5087.30 with net loss of 117.40 points or 2.26%. With this, the Markets have formed a sharply lower top and lower bottom on the Daily High Low Charts.

For today, there are chances that the Markets spend the session in a range bound trade. The Markets are expected to open on a mildly positive to flat note and trade in a range in the initial session, thereafter deciding its trend, but more or less the consolidation / correction in the Markets is expected to continue. For today, the levels of 5125 and 5150 shall act as resistance and the levels of 5060 and 4985 are expected to act as supports on the Charts.

The RSI—Relative Strength Index on the Daily Chart is 62.4570 and it has just crossed below from a topping formation which is a Bearish sign. It does not show any negative / positive divergence and is neutral. The Daily MACD still continues to trade above its signal line. On the Candles, A big black candle occurred.  This is bearish, as prices closed significantly lower than they opened.  If the candle appears when prices are "high," it may be the first sign of a top.  If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance.

Having said this, the Markets have resisted at its 200-DMA of 5205 levels which is also a trend resistance with the falling trend line drawn from its lifetime highs of 6388. In addition to this, NIFTY Futures have shown net decrease of 8.86 lakh share in Open Interest which clearly indicates profit taking. Further, due to this, this levels have become immediate top and no fresh up move is expected until the Markets moves past these levels. What we will see until this happens would be some range bound movement and consolidation with little negative bias. So, even if we see positive opening in the initial trade, there are all chances that the correction may continue or the Markets may trade in a range. Fresh aggressive longs should be initiated only after 5210 levels as no fresh sustainable up move can be expected until that.  Stock specific action, however, would still be seen. Overall, cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331

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