Thursday, September 5, 2013

Daily Market Trend Guide -- Wednesday, September 04, 2013

MARKET REPORT                                                                     September 04, 2013
The Markets took a breather after rise of over 450-odd points in three days but the correction it saw turned out to be much deeper than expected as the Markets ended the day yesterday with a deep cut. The Markets opened on a modestly positive note and it made its intraday high of 5580.95 in the very early minutes of the trade. However, immediately after opening on a modestly positive note, the Markets transformed itself into falling trajectory and remained so for the rest of the entire session. It kept making gradual lows after paring its opening gains. Towards the end, it went on to give the day’s low of 5323.75, coming off over 257-odd points from its opening highs. It finally ended the day at 5341.95, posting a net loss of 209.30 points or 3.77% while forming a higher top but sharply lower bottom on the Daily High Low Charts.

MARKET TREND FOR TODAY

Today, expect the Markets to open on a flat to mildly positive note but might see some more corrective action, at least in the initial trade. However, at the same time, there are chances of the Markets trying to find bottom again from lower levels. Intraday trajectory would be crucially important for today’s trend.

For today, the levels of 5380 and 5425 would be immediate resistance levels for the Markets. The supports come in at 5305 and 5270 levels on the lower side.

The lead indicators do not show much damage as yet. The RSI—Relative Strength Index on the Daily Chart is 40.2970 and it does not show any bullish or bearish divergence or any kind of failure swings and is therefore neutral. The Daily MACD still continues to remain bullish as it trades above its signal line. On the Candles, An engulfing bearish line occurred. If the engulfing bearish pattern occurs during a downtrend (which appears to be the case with NIFTY), it may be a last engulfing bottom which indicates a bullish reversal.  The test to see if this is the case is if the next candle closes above the bottom the current (black) candle's real body.

On the derivative front, the NIFTY September futures have added over 6.29 lakh shares or 3.49% in Open Interest. This signifies some creation of short positions in the Markets, but not so as the quantum of fall suggested earlier.

Having said this, the Markets are poised to move on either side and there is no directional bias that is clear in the Markets. However, with no damage on the lead indicators as yet, we can fairly expect the Markets to find support and recover from the lower levels in case of mildly negative opening.

All and all, the Markets are likely to open modestly weak and trade so at least in the initial session. But given the lead indicators, there are fair chances that the Markets attempt to find some support at lower levels. Given this reading, it is advised that given the velocity of yesterday’s correction, retail traders / investors should refrain from taking any short positions in the Markets. Very selective purchases may be made at lower levels while protecting profits on existing positions.

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

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