Gemstone Equity Research & Advisory Services

Thursday, November 24, 2011

Daily Market Trend Guide -- Thursday, November 24, 2011

MARKET TREND FOR TODAY November 24, 2011

The Markets saw a similar intraday trend that it has been seeing in last couple of sessions. It opened down, remained sideways doing nothing until mid session, and then saw a huge selling pressure in the second half, recovered a bit and finally ended the day at 4706.05, posting a deep cut of 105.90 points or 2.20%. The Markets saw huge volumes yesterday of over Rs. 2.50 lakh Crores and formed a sharply lower top and lower bottom on the Daily High Low Charts.

For today, expect the Markets to open weak again following weak global cues. As seen in the above chart, the Markets have breached the levels of 4770-4780, (the black support line) and also breached the support levels of 4720, the lows from which it bounced back for three times, (just below the black support line).

For today, the support exists for the Markets near 4692 and 4640 levels. Today we have some contradictory reading. The Markets, technically speaking have broken the important trend and support levels and thus, have given a sell signal.

However, having said that, on the Daily Charts, the Markets have moved again into the OVERSOLD territory. The RSI—Relative Strength Index is 28.5091 and it has reached its lowest value in the last 14-days. It does not show any negative divergence or failure swings. However, it now trades in OVERSOLD territory. The Daily MACD continues to remain bearish trading below its signal line.

Apart from the above reading, the NIFTY has first time reported net addition in total Open Interest in NIFTY Futures. Also, the PCR has fallen to 0.86 (sharply from 0.96) which is near bottoming out levels.

However, technical factors / readings have been defied by the Markets which are under severe FII lead pressure and the NIFTY has seen decline of 582.90 points or 11.57% in last 10 sessions without acknowledging any legitimate technical supports. Again, on the other side, the CoC (Cost-of-Carry) continues to decline across stocks which indicates heavy built up of short positions in the system.

Having said all this, there is clear contradiction in technical reading, F&O Statistics and what is actually happening in the Markets, which is a clear indication that the Markets are under artificial pressure lead by few FIIs without any major retain participation. Today is the expiry day and we will continue to see the volatility remain in the Markets and the session weighed down by rollover centric activities.

Again, technically speaking, the Markets are OVERSOLD and a technical pullback is OVERDUE, if not in the morning, then later or after expiry of this current series. Highly cautious approach while avoiding aggressive positions is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in
http://milan-vaishnav.blogspot.com
+91-98250-16331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com

Wednesday, November 23, 2011

Daily Market Trend Guide -- Wednesday, November 23, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY Wednesday, November 23, 2011

Even though the Markets were oversold, the yesterday’s session remained much volatile as global cues weighed more and the Markets moved in very volatile range showing lack of conviction and finally ended the day at 4812.35, up by just 34 points or 0.71% and in the process formed a lower top but higher bottom on the Daily High Low Charts.

For today, again expect the Markets to open on a lower note and look for directions. In case of lower opening, it would be critically important for the Markets to trade above 4775-4780 levels, and in worse case do not breach the 4720 levels which is the very critical filter support of the triple bottom support of 4770-4780 levels.

For today, the levels of 4770 and 4720 shall act as supports and the levels of 4855 and 4890 shall act as resistance on the higher side. The RSI—Relative Strength Index on the Daily Chart is 32.6370 and it has just moved out of the Oversold territory which is Bullish. It is neutral as it shows no failure swings or negative divergence. The Daily MACD continues to trade below its signal line.

It is important to note that today is the penultimate day of the expiry of the current derivative series and thus, the session is also likely to remain dominated with rollover centric activities. Further important to note that cost of carry for December contracts as fallen, widening the discount or decreasing the premium which very clearly signifies that lots of shorts are being rolled over into the next month. Further, any weakness on the Close charts will again make the Markets OVERSOLD. Thus, it is very strong likelihood that we may see a spate of short covering again at lower levels.

This is clearly a market not to sell. The investors are advised to utilize this opportunity to make very selective purchases. The shorts should be strictly avoided as short covering may not be ruled out due to reasons enumerated above. The volatility is likely to stay, due to both global factors as well as ongoing rollovers. However, shorts may be avoided. The intraday trajectory would continue to remain important. Overall, faintly positive but cautious outlook is advised for the day.