Wednesday, June 19, 2013

Daily Market Trend Guide -- Wednesday, June 19, 2013

MARKET REPORT                                                                                       June 19, 2013
Markets continued to see a very volatile session yesterday and after moving in either direction, the Markets finally ended modestly negative. The Markets opened on  a modestly negative note and continued to trade with capped losses. The afternoon trade saw the Markets slipped further and it remained in negative trajectory until the half of the session. However, the later afternoon trade saw a sharp recovery in the Markets. The Markets not only recouped all of its day’s losses but also went on to trade in positive territory as it gave its day’s high of 5863.40 in the late afternoon trade. However, this remained very brief. The Markets failed to capitalize on this recovery. The recovery did not sustain as the Markets pared all of its gains in equally fast manner and lost ground to give the day’s low of 5804.30. It finally ended the day at 5813.60, posting a net loss of 36.45 points or 0.62% while hanging on to its 200-DMA and forming a higher top and higher bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

The analysis for today remains more or less on similar lines as the Markets are expected to open on a flat to mildly negative note and look for directions. The Markets have so far held on to its 200-DMA at Close levels. The opening and behaviour of the Markets vis-à-vis the levels of 200-DMA would be critical. The caution would continue to reign ahead of 2-day FOMC meet that begins today, but the event remains more or less discounted.

For today, the levels of 5877 and 5908 which are the 100 and 50-DMA for the Markets respectively shall act as resistance. The levels of 200-DMA are expected to act as major support at Close levels.

The RSI—Relative Strength Index on the Daily Chart is 42.2094 and it is neutral as it shows no bullish or bearish divergence or any kind of failure swings. The Daily MACD continues to trade below its signal line and is therefore bearish. 

On the derivative front, NIFTY June futures have continued to add yet another over 7.57 lakh shares or 4.45% in Open Interest. It is also important to note that BANKNIFTY and other key stocks too have continued to add open interest significantly.

Given this reading, it is very very important to note that even with selling observed in the cash markets, the derivatives have continuously added the open interest. This is a very significant indicators that says that massive shorts have been created on its way down yesterday. Further, at close levels, the Markets have managed to maintain its support of 200-DMA which is 5805.40 today. So long as Markets continue to hold on to these levels at Close, despite intraday swings, no much weakness may be expected. The shorts too are likely to lend support at lower levels. The caution that we are seeing is because of 2-Day FOMC meet begins today. The markets expect no tapering with the Quantitative Easing measures. 

All and all, the Markets shall remain in a broad trading range until it moves past the levels of 5900-5910. The support of the levels of 200-DMA would be important. As mentioned yesterday, the fresh sustainable rally would occur above 5910. However, importantly, wit the amount of shorts that are being witnessed, we very strong recommend to avoid any short positions as short trap can occur any time.  Any weakness, which would be temporary, should be used to make selective purchases or liquidity should be maintained to hold current positions. Overall, cautious optimism is advised.

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




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