Wednesday, April 16, 2014

Daily Market Trend Guide -- Wednesday, April 16, 2014

MARKET REPORT                                                                                   April 16, 2014
The Markets continued to correct yesterday very much on expected lines as it continued to end the day with losses. The dent would have been even bigger if the IT stocks would not have out performed the Markets. The Markets opened on a positive note and soon formed its intraday high of 6813.40 in the first seconds of the trade. The Markets immediate dipped into the negative territory after that and remained negative for the rest of the session. Almost entire session was spent in a sideward trajectory with no attempt of any pullback. The Markets went on to record its intraday low of 6711.75 in the later afternoon trade. It finally ended the day at 6733.10, posting a net loss of 43.20 points or 0.64% while forming a higher top but lower bottom on the Daily High Low Charts.


The Markets had all the reasons to cry foul yesterday like rise of CPI, WPI inflation and therefore no hopes for a rate cut in near future. However, the reason was also the technical structure of the Markets wherein the correction was long pending and imminent. Today as well, expect the Markets to open on a flat and quiet note but there are absolutely all chances that the Markets would continue with their corrective activities. IT sector would continue to remain in lime light with TCS coming out with its numbers.

For today, the levels of 6370 and 6390 would act as immediate resistance for the Markets. The supports exist lower at 6690 and 6620 levels.

The lead indicators continue show signs of tiredness creeping in the Markets. The RSI—Relative Strength Index on the Daily Chart is 65.9633 and it has just moved out of the “overbought” territory which is a bearish sign. The RSI has also reached its lowest levels in last 14-days which is bearish. Further to this, the RSI has set a new 14-period low while NIFTY has not yet and this is Bearish Divergence as well. The Daily MACD too is bearish as it reported a negative crossover as predicted yesterday. On the Candles, and engulfing bearish line has occurred. The engulfing bearish pattern is bearish if it occurs during an uptrend. It signifies shifting of momentum from bulls to bears. However, this needs an confirmation.

On the derivative front, the NIFTY April futures have shed over 7.64 lakh shares or 4.75% in Open Interest. This continues to signify clear offloading of long positions and profit booking.

Going by the pattern analysis, the Markets have failed to successfully surpass its previous high of 6776 and did not break out above that. It has corrected from those levels while remaining in overbought territory. It is very much likely that this correction continues as very clearly suggested by the lead indicators and is also further supported by F&O data. Any upswings that we would witness would be because of short covering.

Overall, the corrective sentiment in the Markets is likely to continue. Any up move would be sharp short covering from the lower levels. It is reiterated that one should remain away from creating excessive exposure in the Markets. Moderate exposures should be maintained while remaining very much selective on purchases. Overall, cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,

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