MARKET TREND FOR TODAY
May 16, 2013
Influx of liquidity driven by lower WPI inflation drove the
Markets to its 28-month high yesterday in a robust session as it ended the day
with strong gains though with a bearish divergence on the Daily Charts. The
Markets opened on a positive note and after briefly trading with capped gains
inched up further and went on to give the day’s high of 6157.10. The Markets
remained in a one way rising trajectory and showed no signs of giving up during
the entire session. The strength remained intact throughout the session. The
Markets ended the day at 6146.75, posting a robust gain of 151.35 points or
2.52% and formed a sharply higher top and higher bottom on the Daily High Low
Charts.
Today would be critical session in the Markets. The Markets
are likely to open on a flat note and look for directions. There is a bearish
divergence reported on daily charts and there are high chances that the Markets
see some technical correction. Any continuation of up move in this fashion
would make the sustainability under question and shall have all the ingredients
to get trapped at higher levels. Intraday trajectory would be crucial for this.
For today, the levels of 6165 and 6180 shall act as
immediate resistance on the charts. The supports come in much lower at 6090 and
6035 levels.
The lead indicators show very clear signs of weariness on the
Charts. The RSI—Relative Strength Index on the Daily Chart is 66.5845 and
though it does not show any failure swing, NIFTY has reached its 14-day high
while the RSI has not and this is clear BEARISH DIVERGENCE. The Daily MACD continues
to trade above its signal line.
On the derivative front, the NIFTY May futures have added
over 25.48 lakh shares or 11.31% in Open Interest. The NIFTY PCR has inched up
to 1.25 as against 1.19.
Now, a word of great caution. It is very rare to observe
that even with such robust gain in the Markets, the lead indicator, RSI, which
is one of the most effective and important lead indicator, has just inched up
very little. This has lead to indicator showing a bearish divergence on the Charts.
Under such circumstances, as we have been mentioning in our previous editions,
the Markets do tend to move up a bit but the sustainability is always a
question. Such rise is not only dangerous but equally unhealthy and has all the
chances that anyone making blind aggressive longs might get trapped at higher
levels. Further to this, most of the components of BankNifty and the NIFTY have
been trading OVERBOUGHT and with BEARISH DIVERGENCES on their respective Daily
Charts.
All and all, given this reading, today, though we might see
some mild opening, it is very strongly advised to refrain from making any long positions.
The NIFTY, per se, may consolidate a bit before correcting on expected
performance of defensive sectors, but correction from higher levels is
absolutely imminent again and just cannot be ruled out sooner or later. It is
very strongly advised, to keep away from making fresh purchases. While
maintaining adequate liquidity, remaining light on positions and maintaining
ultra selective approach with high degree of caution is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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