MARKET REPORT May
21, 2014
The Markets ended in green for 9th day in a row
but ended after paring of most of its gains and showing all the signs of
continuing consolidation. The Markets opened on a positive note and soon
strengthened its gains in the morning trade as the Markets formed its day’s
high of 7353.65 in the morning trade. However, the Markets pared all of these
gains by late morning trade as it traded flat again and also dipped into the
negative territory while forming day’s low of 7247.70 coming off nearly 80-odd
points from its high. The Markets then spent most of the session trading flat
in sideways trajectory in a very narrow and capped range. It saw a spurt in the
last hour of the trade and recovered some 45-odd points but again pared those
gains in the last half an hour of trade. The Markets finally ended the day with
at 7275.50 posting a nominal gain of 11.95 points or 0.16% while forming a
higher top and higher bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
Today, expect the Markets to open and trade modestly
positive again in the initial trade. However, the global cues remain weak and
given the local technicals, there are fair chances that the Markets continue to
consolidate and mildly correct. Some profit taking from higher levels cannot be
ruled out baring some sectoral out performance. Intraday trajectory would
remain critically important to decide the trend for the day.
For today, the levels of 7295 and 7350 would act as
immediate resistance for the Markets. The supports exist much lower at 7225 and
7185 levels.
The RSI—Relative Strength Index on the Daily Charts is
81.4890 and it has reached its highest value in last 14-days which is bullish.
However, it does not show any bullish or bearish divergence and it continues to
trade in “extremely overbought” condition. The Daily MACD continues to trade above its
signal line.
On the derivative front, NIFTY May futures have shed over
2.83 lakh shares or 1.30% in Open Interest. This signifies that there has been
some shedding of open interest from higher levels yesterday.
Going by the pattern analysis, the Markets have been trading
in extremely overbought condition and at any stage, paring of
some gains and profit taking just cannot be ruled out. Given the never-ending
inflows, even if the Markets continue to rise in this fashion, it is making the
rise un healthy in the immediate short term. Going purely by the pattern analysis,
some correction / profit taking from these levels remain imminent and overdue.
Overall, Markets have shown some signs of tiredness by way
of reduction in OI and this, along with technicals and other factors continue
to point towards consolidation continuing in the Markets. However, sectoral out
performance in the defensives and low beta stocks is likely to be seen. We
continue to reiterate on the advice of maintaining very modest exposures
(avoiding over leverage) and maintaining high degree of caution for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
