Gemstone Equity Research & Advisory Services

Monday, May 23, 2016

Daily Market Trend Guide -- Monday, May 23, 2016

MARKET TREND FOR MONDAY, MAY 23, 2016

Markets had a weak session on Friday and it continued to weaken as it tested its 50-DMA levels while ending with losses. Today, we can see a mild uptick on the Markets and may see some temporary respite from the downside. Today, we can expect a fairly modest and positive opening to the Markets. However, the intraday trajectory that the Markets form would be important to watch out for and so long as it trades below 200-DMA, the levels of 50-DMA will be critical support for the Markets.

For today, the levels of 7800 and 7835 will be immediate resistance levels for the Markets. The supports come in at 7725 and then at 7640 levels.

The RSI—Relative Strength Index on the Daily Chart is 46.63 and it does not show any failure swings. The RSI has not formed a fresh 14-day low while NIFTY has formed and this show Bullish Divergence. The Daily MACD is bearish as it continues to trade below its signal line.

On the derivative front, the NIFTY May futures have shed over 8.73 lakh shares or 5.29% in Open Interest. This indicates unwinding of positions continued in the Markets.

Coming to pattern analysis, after resisting couple of times in the zones of 7970-7990 levels, the Markets took support at its 200-DMA many times and while doing this, it formed a symmetrical triangle on the Daily Charts. It saw a downside breakout and has gone on to test its 50-DMA which is 7725 today. Therefore, the level of 200-DMA which stands as 7798 continue to act as resistance in the immediate short term while the level of 50-DMA, i.e. 7725 will act as immediate support. Any breach below this level will see some more weakness creeping into the Markets. The RSI has not formed a lower low and some amount of moderate pullback cannot be ruled out.

Overall, even if a modest pullback is seen, so long as the Markets trades below its 200-DMA, it will remain vulnerable to the selling pressure from higher levels. Further, with the current week being expiry week, some amount of volatility will continue to remain ingrained in the Markets. While continuing to keep overall exposure in the Markets moderate, cautious outlook is advised for the day.

Milan Vaishnav,

Consulting Technical Analyst

Member: Market Technicians Association, (MTA), USA
Member: Association of Technical Market Analysts, (ATMA), INDIA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Friday, May 20, 2016

Daily Market Trend Guide -- Friday, May 20, 2016

MARKET TREND FOR FRIDAY, MAY 20, 2016

The Markets have given a downside breakout yesterday from the symmetrical triangle formation precisely on the expected lines. Today, the Markets may see a quiet opening today but the upsides are likely to remain capped as the levels of 200-DMA which is 7801 today is likely to act as resistance as the Markets have breached it on the downside yesterday. The intraday trajectory would be critical to watch out for but as of now, every bounce is all likely to get sold into.

For today, the levels of 7801 and 7865 will act as immediate resistance levels for the Markets. The supports come in at 7740 and 7705 levels.

The RSI—Relative Strength Index on the Daily Chart stand at 48.95 and it does not show any failure swing. It shows a bullish divergence as it has not formed a fresh low even when NIFTY reported a fresh 14-week low. The RSI stays within its formation and has not reported a lower low.

On the derivative front, the NIFTY May futures have added over 4.07 lakh shares or 2.53% in Open Interest.

Coming to pattern analysis, we had mentioned in our yesterday’s edition that the more the Markets move towards its apex, more are the chances that we witness a downward breakout. It happened precisely that way but in case of breakout on either side, the intensity is likely to be relatively less. The Markets have breached the support of 200-DMA but continues to stay within its filter. Next logical support for the Markets rests at 50-DMA, which is 7720. It is very much likely that the Markets once again consolidates in a given range before taking a larger directional bias but in any case the levels of 7970-7990 has established themselves as a sacrosanct resistance for the markets in the immediate short term. There would be a bearish under tone at an intensified level if the Markets also breach the 50-DMA. Until then, range bound consolidation cannot be ruled out.

Overall, the Markets will see a quiet opening it is also likely that it sees a volatile movement on either side. We continue to reiterate the strategy of avoiding shorts, and making purchase on a very moderate note in very select defensives until the directional bias is established. It would be equally important to keep protecting profits at higher levels.