Monday, May 23, 2016

Daily Market Trend Guide -- Monday, May 23, 2016

MARKET TREND FOR MONDAY, MAY 23, 2016
Markets had a weak session on Friday and it continued to weaken as it tested its 50-DMA levels while ending with losses. Today, we can see a mild uptick on the Markets and may see some temporary respite from the downside. Today, we can expect a fairly modest and positive opening to the Markets. However, the intraday trajectory that the Markets form would be important to watch out for and so long as it trades below 200-DMA, the levels of 50-DMA will be critical support for the Markets.


For today, the levels of 7800 and 7835 will be immediate resistance levels for the Markets. The supports come in at 7725 and then at 7640 levels.

The RSI—Relative Strength Index on the Daily Chart is 46.63 and it does not show any failure swings. The RSI has not formed a fresh 14-day low while NIFTY has formed and this show Bullish Divergence. The Daily MACD is bearish as it continues to trade below its signal line.

On the derivative front, the NIFTY May futures have shed over 8.73 lakh shares or 5.29% in Open Interest. This indicates unwinding of positions continued in the Markets.

Coming to pattern analysis, after resisting couple of times in the zones of 7970-7990 levels, the Markets took support at its 200-DMA many times and while doing this, it formed a symmetrical triangle on the Daily Charts. It saw a downside breakout and has gone on to test its 50-DMA which is 7725 today. Therefore, the level of 200-DMA which stands as 7798 continue to act as resistance in the immediate short term while the level of 50-DMA, i.e. 7725 will act as immediate support. Any breach below this level will see some more weakness creeping into the Markets. The RSI has not formed a lower low and some amount of moderate pullback cannot be ruled out.

Overall, even if a modest pullback is seen, so long as the Markets trades below its 200-DMA, it will remain vulnerable to the selling pressure from higher levels. Further, with the current week being expiry week, some amount of volatility will continue to remain ingrained in the Markets. While continuing to keep overall exposure in the Markets moderate, cautious outlook is advised for the day.


Milan Vaishnav,
Consulting Technical Analyst

Member: Market Technicians Association, (MTA), USA
Member: Association of Technical Market Analysts, (ATMA), INDIA

+91-98250-16331

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