MARKET REPORT
August 22, 2013
Yesterday’s session turned out to be a thoroughly
disappointing one as the Markets pared all of its strong opening gains to end
the day with losses while adding massive open interest in the derivative
segments and entering the “oversold” levels. The Markets saw a very strong and
gap up opening of over 100-odd points while it gave its day’s high of 5504.10
in the early minutes of the trade. The way it was feared and analysed by us,
the Markets found it difficult to sustain those gains as it pared all of its
gains by afternoon trade to trade flat. It went further deep into the red as
the Rupee made its fresh lifetime lows against the US Dollar. It went on to
give its day’s low of 5268.45, coming off nearly 135-odd points from its
opening highs. It saw a mild recovery towards the end but still ended the day
at 5302.55, posting a net loss of 98.90 points or 1.83% while forming a higher
top but lower bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
After yesterday’s decline, the Markets have entered the “oversold”
territory on the Daily Charts while once again adding “massive” open interest
across the board in NIFTY as well as select stocks in the derivative segment.
The analysis for today again remains more or less on similar lines. The Markets
have been blatantly flouting all technical indicators. It is likely to do it
again today as well. We can expect a weak opening today again, but at the same
time, the opening can be around yesterday’s low levels and see some chances of
recovery “purely on technical grounds”.
Today, the levels of immediate resistance for the Markets
are 5504 levels. The supports come in at 5460 and 5435 levels.
The lead indicators are grossly oversold. The RSI—Relative Strength
Index on the Daily Chart is 28.2431 and it does not show any failure swings.
The NIFTY has made a fresh 14-week low but RSI has not and this is a clear “Bullish
Divergence”. The Daily MACD trades below its signal line and moving fast
towards being “oversold”.
On the Candles, An Engulfing
Bearish Pattern has occurred. If the engulfing
bearish pattern occurs during a downtrend (which appears to be the case
with NIFTY), it may be a last engulfing bottom which indicates a bullish
reversal. The test to see if this is the
case is if the next candle closes above the bottom the current (black) candle's
real body.
On the derivative front,
the NIFTY August futures have added over 34.44 lakh or massive 16.57% in Open
Interest. This indicates that there has been a massive addition of fresh shorts
in the Markets again.
Overall, there is very
little that an analyst can add here on technical grounds. The Markets are “oversold”,
have added “massive” open interest and thereby shorts over last couple of
sessions. Almost over 90% of the Index components trade “deeply oversold”.
Also, these current valuation discount all fears of the Fed tapering, account
deficit, and other such external fears. The Markets would continue to see such
pressure being exerted and this cannot be determined by any technical reading.
HOWEVER, speaking on
technical grounds, we can certainly point out that there are very high chances
that the Markets see a very sharp and equally nasty pullback either later today
or in coming days. The Markets sits in oversold territory and in such
times, a pullback remains imminent even
while being in a continuing downtrend. All we can advice retain traders /
investors is to refrain from making shorts. Fresh purchases too should be
avoided and liquidity should be preserved to protect positions until
directional bias and external pressure gets exhausted and the Markets comes
within the technical ambit. Overall cautious outlook is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
