Gemstone Equity Research & Advisory Services

Wednesday, August 17, 2016

Daily Market Trend Guide -- Wednesday, August 17, 2016

MARKET TREND FOR WEDNESDAY, AUGUST 17, 2016

The Markets continued to remain in corrective mode yesterday and today as well, we continue to keep our analysis on absolutely similar lines. We can expect the Markets to see a modestly negative opening but at the same time, the Markets are expected to continue with its corrective activities as well. As mentioned yesterday, though the corrective actions will not see major downsides but the levels of 8700-8725 has now become a intermediate top for the Markets.

For today, the levels of 8685 and 8720 will act as immediate resistance levels for today while the levels of 8600 and 8560 will see some support coming in for today.

The RSI—Relative Strength Index on the Daily Chart is 57.4580 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD stays bearish as it trades below its signal line.

On the derivatives front, the NIFTY August futures have shed over 2.03 lakh shares or 0.83% in Open Interest. The NIFTY PCR stands at 1.0 as against 1.03.

While having a look at pattern analysis, as mentioned often the Markets showed clear signs of fatigue over past couple of days while the upward rising channel that the Markets was trading in had started getting narrow. The Markets had been trading within this channel that is drawn from the lows that the Markets made in February. The Markets have shown a downward breach from this and currently this has established the levels of 8700-8725 as its immediate top. We will not see any significant runaway up moves coming in and if at all that happens, the sustainability of such up moves will remain questionable. Sound up moves will occur only after the Markets moves past 8725 comprehensively. On the downside, the levels of 8500 remain an important level to watch and a major support as well.

Overall, we continue to reiterate a cautious outlook on the Markets in the immediate short term. Though the inherent long term trend remains explicitly bullish the Markets will show intermittent corrective tendencies though the downsides remain limited. Volatility too will remain ingrained in the Markets. While avoiding any major shorts, any downsides should be continued to be utilized to make selective purchases as stock specific out-performance will continue.

Milan Vaishnav, CMT

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

Tuesday, August 16, 2016

Daily Market Trend Guide -- Tuesday, August 16, 2016

MARKET TREND FOR TUESDAY, AUGUST 16, 2016

The markets will reopen today after a holiday following Independence Day yesterday. Today, we can fairly expect the Markets to open on a flat to mildly positive note and look for directions. Speaking purely on technical grounds, the Markets are expected to open stable and positive and continue with the up move at least in the initial trade. However, the Markets are under consolidation and the levels of 8700-8725 zones will continue to pose major and important resistance to the Markets.

Today, the levels of 8705 and 8725 will act as immediate resistance levels for the Markets. The supports come in at 8630 and 8610 levels.

The RSI—Relative Strength Index on the Daily Chart is 60.1510 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD stays bearish as it trades below its signal line. On the Weekly Charts, the Weekly RSI is 68.7229 and this too remains neutral as it shows no bullish or bearish divergence or any failure swings. The Weekly MACD remains bullish trading above its signal line. On the Candles on the Weekly Charts, a Hanging Man formation has occurred for the second consecutive week. Though this may not be a classical Hanging Man formation, it has potential enough to halt the up move. However, this always requires confirmation.

On the derivatives front, the NIFTY August futures have shed over 8.75 lakh shares or 3.43% in Open Interest. This makes quite evident that the rise that we saw on Friday was more on account of short covering.

Coming to pattern analysis, the Markets have broken out of the rising channel formation, a channel that is drawn from the February lows. As mentioned often in our previous editions, this channel was getting narrower and a sharp movement on either side was not ruled out.

Currently with the channel getting narrower, the Markets showed a downward breach, only to move up again. However, it still continues to trade below and outside the said channel. Further, while having a look at the Weekly Charts, the pattern clearly suggests potential halting of the uptrend. Though this remains a high possibility, this always requires a confirmation on the next weekly bar.

Overall, given the above facts, it is very much evident that the Markets are very less likely to give a runaway rise on the upside. In case of such runaway rise, the sustainability of such rise would be questionable. The Markets are likely to continue to remain in corrective mode. However, given the inherent buoyancy of the Markets, such corrective actions will be characterized with limited downsides and more of range bound sideways movements. The stocks / sectors that underperformed over previous two weeks are likely to lead. Overall, we continue to reiterate to use dips to make selective purchases at lower levels.