Tuesday, July 17, 2012

Daily Market Trend Guide -- Tuesday, July 17, 2012

MARKET TREND FOR TODAY                                                               July 17, 2012
Despite the lower than expected inflation numbers which came in at 7.25% for June as against 7.55% in May, the Markets remained in a range and it furthered its losses in the last hour of the trade to end the day with modest losses. The Markets opened on a moderately positive note and traded in a capped range. It dipped into the red in the late afternoon trade, but again recovered to trade in the green. However, the Markets continued to remain a capped range until late afternoon. The Markets extended its losses on lower volumes as it dipped into the red again and went on to give the day’s low of 5190.45. It finally ended the day at 5197.25, posting a moderate loss of 30 points or 0.57%. It has formed a lower top and lower bottom on the Daily High Low Charts.

The Markets are expected to open today on a decently positive note and trade positive at least in the initial trade. The intraday trajectory would be important to maintain and capitalize on the expected morning gains. Though the Markets ended negative yesterday, it is still in a  broad range and above its critical support levels.

For today, the levels of 5220 and 5265 are immediate resistance on the Charts whereas the levels of 5190 and 5170 are important supports.

The lead indicators continue to point towards some weakness as RSI—Relative Strength  Index on the Daily Chart is 50.5040 and it has reached its lowest value in last 14-days which is bearish. Also, the RSI has made a new 14-day low, but NIFTY has not yet, and this is bearish divergence. The Daily MACD remains bearish as it trades below its signal line. 

Having said this, it is equally important to note that the NIFTY has added in Net Open Interest and so has stock futures. This implies that with the yesterday’s decline, there has been no unwinding in the Markets. Also important to note is that there is no structural breach on the Charts as the Markets continue to trade above its critical support levels of 5170-5160 levels. So long as the Markets trade above this levels, there is no negative breach on the Charts and no long lasting weakness can be expected. Also, NIFTY PCR stands at 1.17, leaving significant gap for the up side.

All and all, range bound movement expected again as the Markets trade in a range. We continue to advice to avoid shorts as there is no structural breach on the Charts. Also, aggressive longs are not advised as the Markets continue to remain in a range. It would be prudent to remain selective in purchases while protecting profits at higher levels. Overall, positive caution is advised for today.

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


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