Tuesday, January 7, 2014

Daily Market Trend Guide -- Tuesday, January 07, 2014

MARKET REPORT                                                                            January 07, 2014
Markets continued to have a range bound correction session yesterday wherein it opened negative and spent the entire session in a 30-odd point range to end the day with modest losses. The Markets opened on a modestly negative note as expected and spent the morning session in a very narrow range. In the late afternoon trade, the Markets gave up bit more as it went on to give the day’s low of 6170.25. The Markets hovered around those levels for while but managed to recover from those levels. It saw some recovery coming in the last hour of the trade. The Markets recovered and finally managed to end the day at 6191.45, posting a modest loss of 19.70 points or 0.32% while forming a Parallel Bar – similar top and bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

Once again, the analysis for today remains similar as that of last two days. The Markets have managed to hold on to the support of 50-DMA at Close levels since last two sessions. Today, expect the Markets to open on a flat note and look for directions. Trading of the Markets above the levels of 50-DMA and maintaining it at Close levels would continue to be of critical importance for the Markets. The intraday trajectory would remain crucial.

For today, the levels of 6225 and 6250 are immediate resistance on the Daily Charts. The supports exist at 6160 and 6125 levels on the downside.

The RSI—Relative Strength Index on the Daily Chart is 46.7182 and it has reached its lowest value in last 14-days which is bearish. Also, the RSI has formed a new 14-period low while NIFTY has not yet and this is bearish divergence. The Daily MACD remains bearish as it continues to trade below its signal line. However, on Candles, an engulfing bearish pattern has 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, NIFTY January futures have added a nominal 1.55 lakh shares or 0.88% in Open Interest. We can say that the OI has remained practically unchanged with a positive bias as it has shown a mild increase.

Given the above reading, the lead indicators show that we may see some mild weakness persisting in the Markets for immediate short term. However, given the F&O data and the formation on the Candles charts, we also see that this may be of very short term and the Markets would continue to trade with a positive bias so long as it maintains support of 50-DMA and its filters at Close levels.

Overall, we may see the Markets range bound once again and intraday trajectory that the Markets forms would be of critical importance. The levels of 50-DMA would be important to watch for at Close and volumes too would play a critical role. However, until now, the Markets will trade with a positive bias as it has maintained its critical supports and no major shedding of OI is seen. While avoiding shorts, modest purchases may be made while maintaining a positive caution on the Markets.

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



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