Wednesday, February 6, 2013

Daily Market Trend Guide -- Wednesday, February 06, 2013

MARKET TREND  FOR TODAY                                                               February 06, 2013
Yesterday was a relatively resilient session as the Markets did not show more weakness than the opening weakness which was relatively much less than its Asian peers and did not break down and traded the day in a capped range above its critical supports, much on the expected lines. The Markets opened negative back of weak global cues and continued to trade in 25-odd points capped range. Though the global weakness was more, the markets held out its important support levels as it recovered a bit after giving the day’s low of 5946.90 against the expected support levels of 5940. The levels of 50-DMA, which is 5947.24 today has held out as support. The Markets ended the day at 5956.90, posting a net loss of 30.35 points or 0.51% while forming a lower top and lower bottom on the Daily High Low charts.

For today, we are likely to see some respite from the weakness that we have been seeing. Expect the Markets to open on a flat to moderately positive note and look for directions. Today would be crucial session for the Markets as it is expected to trade above 5940-5930 levels to avoid any further weakness creeping in. Therefore, the intraday trajectory would be important to decide the trend for today, as well as for coming days.

Today, the levels of 5940-5920 shall act as important and immediate supports.

The RSI—Relative Strength Index on the Daily Chart is 44.1959 and it has reached its lowest value in last 14-days which is bearish. However, it does not show any bearish or bullish divergence. The Daily MACD is bearish as it continues to trade below its signal line. 

On the derivative front, NIFTY Futures have shed 1.36 lakh shares or little over 1% in open interest. The NIFTY PCR stands at 0.94 as against 0.90 which is not so bad.

In last couple of days, we have seen quite large amount of short positions being built by the FIIs. During this very same period, the DIIs have remained net sellers in the Markets. Under similar circumstances where FIIs pile up shorts, DIIs usually remain net buyers but the trend has been opposite this time and the combination of these two factors have kept the Markets under pressure since last couple of sessions.

Having said this, big amount of shorts still continue to exist in the Markets. There has been no break down on the Charts and the Markets so far, continue to trade in a broad trading range. As mentioned above, the Markets will have to trade above the levels of 5940-5930 in order to avoid any further weakness. It is advised to remain very light in positions while making selective purchases. Shorts should be avoided as given the amount of short positions, short trap may occur. A very selective and cautious approach with positive optimism is advised for today.

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



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