Thursday, August 16, 2012

Daily Market Trend Guide -- Thursday, August 16, 2012

MARKET TREND FOR TODAY                                                           August 16, 2012
The Markets had a good second half of the session as it reacted to lower than expected inflation and ended the second day with modest gains. Though what the Markets overlooked on Tuesday was the decline in exports and the widening of the deficit. The Markets opened on a quiet note as expected and briefly dipped into the red giving its intraday low of 5328.80. However, after the announcements of the inflation numbers, the Markets saw some short covering lead by banks and interest rate sensitives as it not only recouped its minor losses but went on to give the day’s high of 5387.05. It hovered around those levels until the end of the session and finally ended the day at 5380.35, posting yet another modest gain of 32.45 points or 0.61%. The Markets have formed a higher top and higher bottom on the Daily High Low Charts.

Today, we may see a flat to mildly negative opening as the current mild positive global cues are likely to get offset as the global markets were weak yesterday and we had a holiday here. We are likely to see a flat to mildly negative opening and the consolidation after the Tuesday’s rise is likely to continue as the Markets are yet to move past their major resistance levels.

The levels of 5400 are likely to continue to act as major resistance as indicated by the red trend line on the Charts.

 The RSI—Relative Strength Index on the Daily Chart is 66.1755 and it has reached its highest value in last 14-days. Though it does not show any negative or positive divergence. The Daily MACD continue to trade above its signal line.

The NIFTY and Stock futures have continued to add in Open Interest overall and the NIFTY PCR has inched up to 1.22.

Having said this, there are two important factors to be kept in mind. First, the Markets are yet to move out of the resistance zone of 5377-5405. So, they are likely to continue to resist around these levels, even if we see positive trade initially. Secondly, on the fundamental side, though the inflation numbers have been lower than expected, the trade deficit has been at its all time low with the exports falling by 14.8%. This is likely to contribute to the current technical formation on the Charts.

All and all, it is advised not to get carried away by the Tuesday’s up move and no aggressive longs should be built until the Markets moves past its key resistance levels. Consolidation and bouts of profit booking would be continued to be seen, making the Markets either range bound or bit volatile. High degree of selective approach is advised with cautious outlook today.

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


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