Wednesday, May 8, 2013

Daily Market Trend Guide -- Wednesday, May 08, 2013

MARKET TREND FOR TODAY                                                                    May 08, 2013
The Markets saw a buoyant session yesterday driven by liquidity as it opened positive and later surged further on the upside to end the day with gains. The Markets opened on a positive note following positive global trend. It traded positive, but in a capped range in a sideways trajectory in the first half of the session. However, in the second half in the afternoon, it saw further strength as it perked up further. The Markets went on to give the day’s high of 6050.50 towards the end of the session. It ended the day at near the high levels of the day at 6043.55 posting a decent gain of 72.50 points or 1.21% while forming a sharply higher top and higher bottom on the Daily High Low charts.


Technically speaking, since the Markets have ended the day near the high point yesterday, it is likely that it opens on a positive note again and continues with its up move, at least in the initial trade. We are likely to see a positive opening but the intraday trajectory would continue to be important as sustainability of the opening gains would be crucial given the indications on the lead indicators.

For today, the levels of 6060 an 6085 are likely to act as resistance on the Charts and the supports come in much lower at 5990 and 5955 levels.

The lead indicators show some signs of weariness in the Markets. The RSI—Relative Strength Index on the Daily Charts is 68.2001 and it does now show any failure swings. However, the NIFTY has set a new 14-day high but the RSI has not. This is a BEARISH DIVERGENCE. The Daily MACD continues to remain bullish as it trades above its signal line.

On the derivative front, the NIFTY May futures have added over 16.80 lakh shares or 8.78% in Open Interest. This is certainly a positive factor for the Markets as it shows continuation of creation of longs and the rise that we saw yesterday was not on account of short covering. The NIFTY PCR stands at 1.20 as against 1.14 yesterday.

Having said this, it is important to note that any further continuation of up move shall take the Markets near its OVERSOLD levels. It is also important to note that, the lead indicators have started showing the signs of weariness in the Markets. Though it may not get reflected immediately, it shows some indication of impending minor correction. It is also important to note that many of the key components of the NIFTY are already trading OVERSOLD with their lead indicator overstretched.

Keeping this in view, it sometimes happens that the Markets continue to see up move even if the lead indicators on the technical charts suggest otherwise. It may continue to see buoyancy for some more time as the rally is liquidity driven, which often tends to disregard caution indicated by the Charts. Even today, there are chances that we may continue to see the up move, but given the overall reading, we would strongly suggest to use any further up move as an opportunity to book profits and fresh long positions should be avoided at this juncture. Overall, continuation of approach with high degree of caution is advised for today.

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



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