Gemstone Equity Research & Advisory Services

Tuesday, May 24, 2016

Daily Market Trend Guide -- Tuesday, May 24, 2016

MARKET TREND FOR TUESDAY, MAY 24, 2016

The Markets witnessed terrible amount of volatility yesterday as it swung 200-points both sides in total before ended the day with modest losses. Today, we can expect the Markets to see a quiet opening again but the analysis will continue to remain on similar lines. The Markets have been taking support on its 50-DMA which stands at 7730 today since last 2-3 days and this level will be critical to watch out for. Any significant slippage below this level can induce some more weakness in the Markets.

For today, the levels of 7765 and 7810 will act as immediate resistance levels for the Markets. The supports come in at 7710 and 7650 levels.

The RSI—Relative Strength Index on the Daily Chart is 45.35 and it does not show any failure swing. The NIFTY has formed a fresh 14-day low but RSI has not and this is Bullish Divergence. The Daily MACD stays bearish as it trades below its signal line.

On the derivative front, rollovers continued as the NIFTY May futures shed over 10.05 lakh shares or 6.44% in Open Interest while June futures added over 28.21 lakh shares or 77.25% in Open Interest. The NIFTY PCR stands at 0.83 as against 0.86.

Coming to pattern analysis, as mentioned often in our previous edition, the Markets have given a downside breach from a symmetrical triangle formation on the Daily Charts. While doing so, it took support at its 200-DMA couple of times and after this breach, this very same level of 200-DMA which stands at 7795 will act as resistance for the Markets. However, the 50-DMA, which is 7730 has been acting as support since two days and this level would be critical to watch out for. If the Markets breach this level, we will see some more weakness in the Markets in the immediate short term. However, there has been no structural breach on the Daily Charts and this remains a normal correction. The RSI has stayed within its formation and has not formed a fresh low indicating some resistance to major downsides.

Overall, it is important to note that the Markets have done nothing that warrants a structural breakdown. However, we will continue to see some more corrective activities and unless the Markets moves back above its 200-DMA all up moves should be utilized to protect existing profits. While avoiding shorts and keeping fresh purchases at moderate levels cautious outlook is advised on the Markets.

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

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.