Daily Market Trend Guide -- Monday, January 18, 2016

MARKET REPORT                                                                                      January 18, 2016

What seemed to be a listless and consolidating session for the Markets on Friday turned out to be an yet another disappointing one as the Markets ended yet another day with losses. The Markets saw a modestly positive opening and traded in a capped range with limited gains in the early morning trade. During this time, it formed its day’s high of 7556.50. However, after briefly trading in the green, the Markets gradually slipped into red. However, still, the Markets traded in sideways trajectory. It headed nowhere while trading in a very capped and narrow range. It was the late afternoon trade that saw sharp fall in the Markets once again. The Markets very rapidly lost ground and went on to form the day’s low of 7427.30, just a whisker away from its 52-week low. However, after very minor recovery, the Markets ended the day at 7437.80, posting a net loss of 99 points or 1.31% forming lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR MONDAY, JANUARY 18, 2016

Speaking purely on technical grounds, the Markets ended on Friday near their low point and therefore are likely to continue to see some downside in the initial trade today. However, today, though we can expect to see a modestly negative opening, we can also hope for some respite from the weakness that we saw in the previous week. Markets are nearly oversold and there are some faint chances that the Markets may attempt to find temporary bottom and stabilize.

For today, the levels of 7480 and 7540 will act as immediate resistance levels for the Markets. Supports come in at 7420 and 7365 levels.

The RSI—Relative Strength Index on the Daily Chart is 31.5345 and it has reached its lowest value in last 14-days which is bearish. It does not show any bullish or bearish divergence.  The Daily MACD stands bearish as it trades below its signal line. On the Candles, and Engulfing Bearish Pattern has occurred. If this occurs during a downtrend which appears to be the case with NIFTY, it indicates a bullish reversal. However, this needs confirmation today.  On the Weekly Charts, the Weekly RSI is 37.1995 and it has reached its lowest value in last 14-days which is bearish. However, it does not show any bullish or bearish divergence. The Weekly MACD remains bearish as it trades below its signal line.

On the derivative front, the NIFTY January futures have added over 2.65 lakh shares or 1.19% in Open Interest. This shows further creation and addition of fresh shorts in the system. The NIFTY PCR stands at 0.82 as against 0.83 on Friday.

Coming to pattern analysis, the Markets have ended near the low point of the day on Friday and while doing so it has also breached its important pattern support levels of 7540. It is evident that on its way up, this level is all likely to pose resistance. There is no doubt that such close has made the Markets structurally weaker. However, at the same time, it is also important to note that lead indicators of the Markets are nearly “oversold” and any downtick at Close levels will make the Markets oversold .So, it becomes important to note that even if the Markets have got little structurally weaker, some amount of technical pullback remains imminent even if it continues to remain in overall downtrend.

All and all, it is also important to note that over half of NIFTY components are oversold. It is also important to note that nearly half of top BANKNIFTY components are oversold. This shows that some amount of pullback, either today or in coming days is now overdue. However, it should be noted that until the Markets are back above 7800, any rise will just remain a technical pullback and we will continue to remain in overall downtrend. It is advised to use all pullbacks to exit and protect profits while continuing to adopt a cautious outlook on the Markets.

Milan Vaishnav,
Consulting Technical Analyst

Af. Member: Market Technicians Association, (MTA), USA
Af. Member: Association of Technical Market Analysts, (ATMA), INDIA
www.EquityResearch.asia
http://milan-vaishnav.blogspot.com

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