Gemstone Equity Research & Advisory Services

Tuesday, July 8, 2014

Daily Market Trend Guide -- Tuesday, July 08, 2014

MARKET REPORT July 08, 2014

The Markets continued to inch upwards to newer lifetime highs as it opened positive, traded in a 30-point capped range and ended the day with modest gains. After opening on a flat to mildly positive note, the Markets maintained its initial gains but gradually drifted lower. It continued to slip very mildly and by afternoon trade had pared most of its gains but continued to trade in positive territory. Again, the second half of the session saw some recovery coming in as the Markets formed its intraday high of 7792. These levels were maintained as the Markets finally ended the day at 7787.15, posting yet another modest gain of 35.55 points or 0.46% while forming a higher top and higher bottom on the Daily High Low Charts. The volumes remained slightly lower yesterday than the average.

MARKET TREND FOR TODAY

Expect the Markets to open once again on a mildly positive note and look for directions. Quiet opening may be expected but for the rest of the week, the Markets shall remain dominated with external events. We have Railway Budget coming up today, Economic Survey tomorrow and Union Budget, the day after. The Markets shall remain range bound and volatile and might see some profit taking bouts as they remain “overbought” on both Daily and Weekly Charts.

For today, the levels of 7790 and 7825 may act as resistance levels. Supports exist much lower at 7700 and 7630 levels.

The RSI—Relative Strength Index on the Daily Chart is 70.5986 and it has reached its highest value in last 14-days which is bullish. However, it now trades in “overbought” zone. The Daily MACD has reported a positive crossover and now trades above its signal line.

On the derivative front, NIFTY July futures have added 83,400 shares or nominal 0.58% in Open Interest. This shows that there has been no major additions / offloading of fresh positions in yesterday’s session. Stock future shave shed nearly 1 Crore shares in Open Interest yesterday.

If we look at pattern analysis, the Markets have formed what is known as ‘rising wedge’ on the Daily Charts. Such patterns normally induce minor corrections from higher levels. Further the Markets continue to trade “overbought” on both Daily as well as Weekly Charts as clearly evident from the lead indicators.

Given the above reading, there is no possibility that the Markets show a ‘run-away’ upward rise in immediate short term. If it does show such sporadic rise, it would be due to external events that are lined up but under these circumstances fresh open ended buying should be very strictly avoided. Any sporadic rise would make the Markets unhealthy and make profit taking bouts imminent and uncertain. Overall, while maintaining liquidity, very moderate positions with cautious outlook should be taken 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

Monday, July 7, 2014

Daily Market Trend Guide -- Monday, July 07, 2014

MARKET REPORT July 07, 2014

The Markets once again saw a remarkable recovery in the second half of the session on Friday as the Markets recovered nearly 80-odd points from the lows of the day to end the day with modest gains. The Markets opened on a quietly positive note and after moving sideways with minor gains in the morning drifted slowly in to the red. The Markets saw some further pressure coming in by afternoon trade and it went on to slip further and form the day’s low of 7661.30, dropping well below critical 7700-levels. However, the second half of the session saw a smart recovery as the Markets reversed its trend and started to recover from its lows. The Markets not only recouped all of its losses but went on to trade back into positive territory. It went on to form the day’s high towards the end of the session at 7758. It finally ended the day at 7751.60, posting a modest gain of 36.80 points or 0.48% while forming a nearly similar top but lower bottom on the Daily High Low Charts.

MARKET TREND FOR TODAY

Today, expect the Markets to open on a flat note and look for directions. Since there is no directional bias since last two sessions on Close Charts, the analysis remains once again on similar lines as that of Friday. The Markets behaviour vis-a-vis the levels of 7700 would be critically important. So long as the Markets maintains itself above this level, we will see some consolidation happening. Any drift below 7700 levels will see the Markets getting somewhat weaker.

For today, the levels of 7760 and 7790 would act as resistance levels and the levels of 7700 and 7630 would act as immediate support.

The lead indicators continue to maintain a negative bias. The RSI—Relative Strength Index on the Daily Chart is 68.9255 and it does not show any failure swings. However, the NIFTY has formed a new 14-period high whereas the RSI has not yet and this is Bearish Divergence. The Daily MACD continues to remain bearish as it trades below its signal line. On the Weekly Chart, RSI is 78.1730 and show a clear Bearish Divergence. The Weekly MACD remains in “overbought” range.

Study of pattern analysis clear show that the Markets attempted a clear breakout above 7700 levels but did not confirm it by moving past that level significantly. However, it has consolidated around those levels. It is clear that the behaviour of the Markets as against 7700 levels would be crucial as any dip below that would induce short term weakness in the Markets. Further, looking at the lead indicators on the Daily as well as Weekly Charts, the chances of Markets going for a breakout are grim.

Going by the above, we continue to reiterate the policy of very controlled and minimum leverage in the Markets. Any purchase, if made, should be limited to defensives only. Profits should be vigilantly protected on the upside. Overall, continuance of cautious outlook is advised for today.