Tuesday, August 27, 2013

Daily Market Trend Guide -- Tuesday, August 27, 2013

MARKET REPORT                                                                                     August 27, 2013 

The Markets had a very volatile session yesterday as it also reacted to the neckline resistance levels mentioned in our yesterday’s edition of Daily Market Trend Guide and also swinged 70-odd points in either direction to end the day on a flat note. The banking stocks remained subdued and the currency continued to weaken taking the toll on the Markets. The Markets opened on a decently positive note and soon gave its intraday high of 5528.70 in the first hour of the trade. The Markets then gradually pared those gains in the morning trade to trade flat. The Markets spent the morning session with capped gains and then dipped into the red to give the day’s low of 5454.45. The Markets saw a sharp 60-odd point spurt in the afternoon trade where in it attempted to scale near its previous highs but could not sustain that recovery either. It pared its gains again and finally settled at 5476.50, posting a very nominal gain of 4.75 points or 0.09% while forming a higher top and higher bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

We had mentioned in our yesterday’s edition of Daily Market Trend Guide that the behaviour of the Markets vis-à-vis the levels of 5500 would be important. The Markets reacted from those levels yesterday, twice. This is the double bottom support that the Markets broke on its way down and this would act as immediate resistance. Today, expect the Markets to open on a modestly lower note and look for directions.

Today, the levels of 5500 and 5525 would act as immediate resistance levels on the Charts. The supports would be 5440 and 5415 levels.

The lead indicators continue to remain in place. The RSI—Relative Strength Index on the Daily Chart is 40.6991 and it does not show any failure swings or any bullish or bearish divergence. It is neutral. The Daily MACD continues to trade below its signal line. 

On the derivative front, there is net addition reported in the open interest of NIFTY and Stock futures. We have entered the expiry week and the session would continue to remain dominated with rollover centric activities.

From the reading above, two things are evident. First, on the technical grounds, as expected the Markets have reacted to the 5500 levels, these are the levels  -- the double bottom support that the Markets broke on the down side and is now likely to act as resistance. The levels of 5500-5525 would now act as immediate important resistance for the Markets. Secondly, we have entered the expiry week and the Markets are bound to remain dominated with rollover centric activities. This will keep the sessions certainly volatile.

All and all, the reading is that in order to effect the trend reversal and confirm the recent bottoms, the Markets will have to move past the levels of 5500-5525 with conviction. Until this happens the sessions would remain grossly volatile and the consolidation and volatility as we saw yesterday would continues. There are no indications to short the Markets and therefore very selective purchases can be made. Currency would continue to exert pressure on the Markets. 

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


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