Thursday, August 1, 2013

Daily Market Trend Guide -- Thursday, August 01, 2013

MARKET REPORT                                                                                   August 01, 2013 

The Markets saw a relief recovery from the day’s low after a negative start to end the day on modest losses. The Markets opened on a negative note and soon plunged to the day’s low of 5675.775 in the early minutes of the trade. After having made that bottom in the early morning trade the Markets saw some minor recovery and continued to trade sideways in the first half of the session. The Markets saw some more recovery coming in the second half of the session as the Markets almost pared all of its losses to trade near the previous day’s close. After trading in capped range again near those levels, it finally ended the day at 5742, posting a net loss of just 13.05 points or 0.23%. The Markets recovered almost 70-odd points from its day’s lows but has continued to form a lower top and lower bottom on the Daily High Low charts.


MARKET TREND FOR TODAY

The Markets have seen a strong short covering from the lower levels yesterday and today as well, it is likely to open on a modestly positive note and look for further recovery and relief rally. The Federal Announcements yesterday has not brought in anything negative and this has helped the global markets trade stable. The intraday trajectory would continue to remain important and we are likely to see the Markets continue with the recovery, at least in the initial trade.

For today, the immediate resistance on the Charts are 5810 and 5853 levels. The supports come in at 5675 and 5640 levels.

The RSI—Relative Strength Index on the Daily Chart is 38.9770 and it has reached its lowest value in last 14-days. However, it does not show any bearish divergence on the charts. The Daily MACD remains bearish as it trades below its signal line. On the Candles, A long lower shadow occurred.  This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

On the derivative front, the NIFTY August futures have shed over 6.50 lakh shares or 3.76% in open interest. This very clearly signifies that the recovery that we witnessed yesterday was on account of very strong short covering.

Again, as we had mentioned in our yesterday’s edition of Daily Market Trend Guide that almost all components of NIFTY and BANKNIFTY and very good liquid MIDCAP Stocks are trading OVERSOLD or nearly OVERSOLD. This is likely to lend support the Markets which has witnessed significant shorts being built up in the previous sessions.

All and all, there are strong chances that after a modestly positive opening, the Markets continue with its attempt to pullback after recent losses. Though the intraday trajectory would be important to determine the trend, some volatility as well cannot be ruled out. However, still given the shorts that exists and given the fact that major stocks trade nearly OVERSOLD, such pullbacks cannot be ruled out. Given this reading, we continue to advice to keep making selective purchases, of course without compromising on liquidity. While avoiding shorts, cautious optimism should be continued.


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




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