Gemstone Equity Research & Advisory Services

Tuesday, December 13, 2011

Daily Market Trend Guide -- Tuesday, December 13, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY December 13, 2011

The Markets had a very disappointing session yesterday as it remained the worst performer after it peers and even after US and European Markets had closed with gains on Friday as yesterday, it was weighed down by domestic macro factors as it ended the day with losses. The Markets opened on a positive note, and gave its intraday high of 4910.25 in the early seconds of the trade. Thereafter, the Markets remained in falling trajectory for the entire session, went on to give its day’s low of 4755.55 and ended the day at 4764.60, posting a net loss of 102.10 points or 2.10%.

Today, expect the Markets to open on a moderately lower note and look for directions. Today, the levels of 4720 and 4680 are likely to act as supports. At this point, we would like to point out that the Indian Markets have remained the worst performer as compared to its peers. Yesterday’s fall or bad sentiment can be attributed to the very bad IIP numbers that we got, but before that, we have remained dominated with global factors and yesterday’s reaction to the IIP numbers apart, we have continued to defy the important technical indicators. The Markets continuing to decline despite the lead indicators remaining bullish (not counting yesterday’s reaction to IIP), is enough proof that the Markets are not behaving in line with the technical indicators.

Today also, similar pattern is expected to be seen as the lead indicators still continuing to remain in place. The RSI—Relative Strength Index on the Daily Chart is 39.2206 and is neutral as it shows no negative divergence or failure swings. The Daily MACD still remains bullish as it trades above its signal line. Further to this, NIFTY Futures have added over 9.45 lakh shares in Open Interest and this shows creation of shorts in the system. Further proof of the creation of shorts is the fact that the premium which was over 25-points two days back has shrunk to just over 8 points.

We would also further like to point out that even if the Markets continues to see short creation, and attempts to touch its previous lows, they are unlikely to break the falling channel again, without seeing a technical pullback as the indicators would have got Oversold again.

Having said this, even if Markets continue to shed some weight, we can expect some stability to return to the Markets. In case of lower opening, it would be essential for the markets to trade above 4780 as this would act as temporary resistance. We would also like to point out again that even if we take yesterday’s reaction of the Markets to the IIP numbers as justified, it has remained underperformer since very long and lots of shorts are seen in the Markets. So, barring a weakness for a day apart, there are bright chances of a sharp short covering or a technical pullback and short squeeze can happen.

These lower levels can be utilized to make very selective purchases. It is continued to avoid aggressive positions on either side and maintain cautious outlook for the day.

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

Monday, December 12, 2011

Daily Market Trend Guide -- Monday, December 12, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY December 12, 2011

After a weak close on Thursday, the Markets continued its disappointing performance on Friday too, following global weakness and the caution the world Markets exercised before the EU Summit. The Markets opened weak on expected lines and went on to give its intraday low of 4841.75. It made a sharp recovery in the mid session recovering almost all of its losses but pared those recovery again towards the end and ended the day at 4866.70 posting a loss of 76.95 points or 1.56%. The Markets have ended the week with net loss of 183.45 points or 3.66%.

As evident from the above chart, there is no structural breach on the Daily Chart but the Markets have went on to form a sharply lower top and lower bottom on the Daily High Low Chart.

The Markets, this week, again continues to give slightly contradictory reading on the Daily and Weekly Charts. For today, the Markets are expected to open on a modestly positive note and look for directions. The Markets are expected to open modestly positive and further add to its gains and for this, the intraday trajectory that it forms after opening would be critically important and the Markets will have to remain in rising positive trajectory as long as possible. The levels of 4910 and 4965 shall act as resistance and the levels of 4810 and 4780 are likely supports.

The RSI—Relative Strength Index on the Daily Chart is 43.9386 and it shows no negative divergence or failure swings. The Daily MACD continues to remain bullish as it trades above its signal line.

As evident from the Weekly Chart above, again, there is no structural breach as yet on the Charts. However, the Markets have been making a sharply lower bottoms but the level of 4780 continues to remain a all critical support.

Having said this, even with no structural breach on the Charts, NIFTY Futures have reported shedding of 9.62% in Open Interest which is a worry part of the story. This needs to be replaced with fresh buying. On the other hand, most of the stock futures, including major NIFTY components have shown addition of Open Interest with the fall indicating creation of fresh shorts in the Markets.

Further to this, the Markets are likely to react to IIP numbers which shall be announced today and which are going to be dismal. However, most of this stands discounted in the Markets. All and all, lack of direction in the Markets is expected to continue. This will keep the Markets in a range and bit volatile. However, no shorts are advised until the Markets breaches the critical levels, but as usual, by the time it at all breaches, the indicators would stand Oversold. The NIFTY PCR stands sharply lower at 1.02 down from 1.38 two days back. It is continued to adopt a cautious stock specific outlook while protecting long profits and avoiding any short or aggressive positions.