Monday, April 21, 2014

Daily Market Trend Guide -- Monday, April 21, 2014

MARKET REPORT                                                                                     April 21, 2014
The Markets on Thursday (Friday was a trading holiday on account of Good Friday) saw a huge spate of short covering as it ended the day with robust gains. The Markets opened on a modestly positive note and after briefly trading in a capped range surged higher in the late morning trade. The Markets once again continued to trade in sideward trajectory while maintaining those gains. The late afternoon trade saw the Markets gaining further strength as it surged even higher. It went on to post the day’s high of 6783.05 in the last minutes of the trade. The Markets maintained those levels and finally ended the day at 6779.40, posting a robust gain of 104.10 points or 1.56% while forming a higher top and higher bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

The Markets shall open today after 3 days of slumber as it remained closed on Friday. Today, expect the Markets to open on a very flat note and look for directions. This week too is a truncated week with the Markets remaining closed on 24th April due to voting for General Elections. Resultantly, the expiry shall happen on Wednesday. Given the expiry week, and that too short and truncated, the Markets would remain dominated with rollovers and there are bright chances that it does not give a clear breakout on the up side.

For today, the levels of 6825 and 6840 would act as immediate resistance levels for the Markets. The supports exists much lower at 6720 and 6675 levels.

The RSI—Relative Strength Index on the Daily Charts is 65.9687 and it is neutral as it shows no bullish or bearish divergence or any failure swing. The Daily MACD continues to remain bearish as it trades below it signal line. 

On the derivative front, the NIFTY April futures have shed over 4.44 lakh shares or 2.83% in Open Interest. This very clearly signifies that the Markets have seen huge amount of short covering on Thursday. It needs to be seen if this gets replaced with fresh buying. This is the factor that may prevent the Markets from proceeding for a fresh breakout on the Daily Charts.

Going by the pattern analysis, the Markets have not yet given a breakout on the upside even after Thursday’s up move. There are chances that the markets deliberates little more before it proceeds for a breakout. This reading is further validated with the F&O data which shows across the board reduction in Open Interest  which very clearly indicates that the rally that we saw on Thursday was more on account of short covering and not on fresh buying. It would be critically important to see if this gets replaced with fresh buying in the coming session.

All and all, this week would remain cautious as the Markets would again see a truncated week, with a expiry happening a day earlier. It is strongly advised that one should refrain from fresh buying until a fresh and clear breakout is achieved. Only selective and stock specific purchases should be made while avoiding shorts. While remaining moderate on positions, cautious outlook is advised for today.

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



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