Thursday, October 3, 2013

Daily Market Trend Guide -- Thursday, October 03, 2013

MARKET REPORT                                                                             October 03, 2013
After initial weakness, the Markets had a stable session ahead on Tuesday (Yesterday being a trading holiday on account of Mahatma Gandhi Jayanti), as it ended the day on a positive note. The Markets opened on a modestly positive note but saw a knee jerk reaction to the developments in the US over Government shut down and soon gave its day’s low of 5700.95, taking support on its 50-DMA of 5703.80. The Markets came back into the green after a hour long drama and volatility and then spent rest of the session in a rising trajectory. The Markets kept making gradual highs steadily through the rest of the session. It went on to give the day’s high of 5786.45, and finally ended the day at 5780.05, posting a net gain of 44.75 points or 0.78%. However, it has still formed a lower top and lower bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

The Markets are expected to open on a flat to mildly positive note. The Markets are in a strong trading range as it took support on its 50-DMA in the previous session and today, it is likely to open around its 100-DMA or 200-DMA and this would act as resistance. Given this, the trajectory that the Markets form post opening would be critical to determine the trend for today.

For today, the levels of 5840.05, the 200-DMA and 5875 would act as immediate resistance for the Markets. The supports exist at 5703 in form of 50-DMA and then at 5675 levels.

The RSI—Relative Strength Index on the Daily Chart is 50.3135 and it is neutral as it shows no bullish or bearish divergence or any kind of failure swing. The Daily MACD continues to remain bearish as it trades above its signal line. 

On the derivative front, the NIFTY October futures have shed over 5.58 lakh shares or 3.31% in Open Interest. This is little negative as it signifies that no fresh longs were added during the modest rally that we saw on Tuesday.

Given the above reading, it very clearly appears that the Markets are in a consolidation phase with little downward bias. This is conclusion is drawn, going by both , the pattern analysis and reading of F&O data. The Markets have taken support on its 50-DMA on Tuesday, but at the same time, even if it gets a positive opening, it will have to move past its 100 and 200-DMA which are in striking distance before it can continue with any decisive up move.  However, given the reduction in Open Interest seen on Tuesday, there are chances that even if we see a positive opening, some minor shedding of gains can be seen and some downside or a ranged session cannot be ruled out.

All and all, on this is for certain that the Markets have roadblocks ahead before it can continue with any decisive up move. It will have to move past its 500-DMA of 5840 before a sustainable up move occurs. Given this, it is likely that we continue to see the Markets in a trading range and also bit volatile. It is advised to avoid shorting in the Markets as there is no structural breach on the Charts as yet. At the same time, very selective purchases should be made while protecting profits vigilantly at higher levels. Overall, cautious optimism is advised for today.

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


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