Tuesday, May 5, 2015

Daily Market Trend Guide -- Tuesday, May 05, 2015

MARKET REPORT                                                                                   May 05, 2015
Markets posted a sharp short covering led pullback yesterday as it opened strong, got stronger and ended the day with decent gains. The Markets saw a positive start and after opening positive, it traded briefly in a capped range.  It saw some more strength coming in the late afternoon trade as the Markets perked up higher. For the entire session afterwards, the Markets traded with smart gains and maintaining its morning gains. In the last hour of the trade, the Markets also managed to move past its 200-DMA levels as it grew stronger and went on to post the day’s high of 8346 in the final minutes of the trade. The Markets finally ended the day at 8331.95 posting a very decent gain of 150.45 points or 1.84% while forming a higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR TUESDAY, MAY 05, 2015
What the Markets have seen yesterday is a heavy short covering led rally and today, we can expect the Markets to maintain yesterday’s gains. We can fairly expect a quiet opening and in the process the Markets are likely to consolidate a bit with the levels of 200-DMA acting as support. The intraday trajectory would be critically important for the Markets to watch out for along with the behaviour vis-à-vis the levels of 200-DMA. The Markets shall consolidate and in the process, it will have to remain above 200-DMA in order to avoid any more weakness to creep in.
The levels of 8365 and 8410 will act as resistance on the upside whereas the levels of 8273 and 8210 are likely supports on the lower side.
The RSI—Relative Strength Index on the Daily Chart is 42.0491 and it is neutral as it shows no bullish or bearish divergence. The Daily MACD remains bearish as it continues to trade below its signal line.
On the derivative front, the NIFTY May futures have shed over 5.85 lakh shares or 3.09% in Open Interest. This clearly signifies that the upsurge in NIFTY has been because of heavy short covering from lower levels.
Coming to pattern analysis, the Markets had been nearly oversold though it traded below its 200-DMA a day before. It has attempted to take support at these levels at Close and has attempted a pullback since then. Since the Markets have now moved past its 200-DMA on the upside, in event of any consolidation, this level of 200-DMA is expected to act as support. The normal thing would be that the Markets would consolidate on its yesterday’s gains and continue with its up move. However, some amount of volatility while doing so cannot be ruled out.
Overall, though the Markets have attempted a pullback, yesterday’s pullback can be more attributed to short covering from lower levels and some bargain hunting. It would be crucially important to see that this gets replaced with fresh buying and the Markets are able to capitalize on its yesterday’s gains. The chances are that the Markets may consolidate a bit with the levels of 200-DMA now acting as support with an overall upward bias. Positive outlook is advised for the day.

Milan Vaishnav,
Consulting Technical Analyst,
Af. Member: Market Technicians Association (MTA), USA
Af. Member:
Association of Technical Market Analysts, INDIA

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