Tuesday, May 27, 2014

Daily Market Trend Guide -- Tuesday, May 27, 2014



MARKET REPORT                                                                                      May 27, 2014

What seemed to be yet another relentless rise and buoyant session for the Markets turned into an extremely scary and volatile one as the markets ended flat after shedding nearly 200-odd points from its intraday high. The Markets opened on a positive note and soon gained momentum as it kept making gradual highs. At one point in the afternoon trade, the NIFTY moved past the psychological figure of 7500 as it formed its intraday high of 7504. The Markets turned in sideward trajectory after that and it was gripped with extremely volatility in the second half. The Markets saw a sudden and very sharp paring of gains in the late afternoon trade yesterday as it pared all of its gains and dipped into negative. It went on to shed nearly 234-odd points NIFTY from its day’s high as it touched its intraday low of 7269.05. The Markets saw some volatile either side movements and finally ended the day at 7359.05, posting a minor loss of 8.05 points or 0.11% while forming a sharply higher to but lower bottom on the Daily High Low Charts.



MARKET TREND FOR TODAY

Today, we can fairly expect the Markets to open on a flat to mildly negative note and look for directions. Given the valuations of the Market and the technical indicators on the Daily Charts they continue to trade extremely overbought and because of the sharpness of the decline that we say yesterday, we continue to advise to refrain from over leveraging in the Markets. The Markets are all likely to continue with its corrective activity today as well.


Today, the levels of 7385 and 7420 would act as immediate resistance levels for the Markets.
The supports exist much lower at 7275 and 7210 levels.


The lead indicators continue to remain in extremely overbought condition. The RSI—Relative Strength on the Daily Chart is 81.1750 and it is neutral as it shows no bullish or bearish divergences or any failure swings. However, it continues to trade in very overbought condition. The Daily MACD trades above its signal line.


On the derivative front, NIFTY May futures have shed nearly 18.79 lakh shares or 8.94% in Open Interest. This can partly also due to the fact that rollovers have mildly begun and more due the fact that there was very clear unwinding of positions that was seen with the decline in the second half of the session yesterday.


Going by the pattern analysis, the Markets have formed an insufficient top of 7504, i.e. a lower top compared to 7360 formed on 16th of May. This is called “insufficient top” as the Markets formed a slightly lower top and it is just short of a Double Top formation. This confirms the resistance area for the Markets and adds credibility to the resistance.


All and all, we continue to reiterate to remain very moderate on the positions. This is due to the fact that the Markets are prone to equally sharp correctives given the current rise of the Markets. While continuing to remain very moderate on exposures, shorts should be avoided and new purchases should be made in extremely selective basis. Overall, continuance of cautious approach is advised for today.


Milan Vaishnav,

Consulting Technical Analyst,



+91-98250-16331








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