Gemstone Equity Research & Advisory Services

Tuesday, October 18, 2016

Daily Market Trend Guide -- Tuesday, October 18, 2016

MARKET TREND FOR TUESDAY, OCTOBER 18, 2016

While trading precisely on analyzed lines, the domestic equity markets ended yesterday with losses while heading towards the 8500-100DMA support zone. Today, we may see the Markets attempting to gain some stability but just like yesterday, the levels of 8500 and the 100-DMA which is also 8500 will be crucial level to watch for. It would be extremely important for NIFTY to trade above this level in order to avoid any more weakness from creeping in. Any breach below this will lead to some more weakness in the Markets.

For today, the levels of 8545 and 8580 will act as immediate resistance levels while supports come in at 8500 and 8420.

The RSI—Relative Strength Index on the Daily Chart is 37.1088 and it has reached its lowest value in last 14-days which is bearish. It does not show any bullish or bearish divergence.

The Daily MACD stands bearish as it trades below its signal line.

On the derivative front, the NIFTY October futures have shed yet another over 4.86 lakh shares or 2.53% in Open Interest. This clearly indicates continuation of long unwinding / offloading in the Markets.

Coming to pattern analysis, NIFTY breached a Descending Triangle pattern on the Daily Charts as it went below the 50-DMA which was also its neckline level of 8690. With yesterday’s decline, it has completed its expected measuring implication. While it reached its expected levels post negative breakout, the level of 8500 is important pattern support as well. Post recent high of 8968, the NIFTY has formed a small falling channel as well. The level of 8500 is a pattern support of the lower support line of the Channel and is also the 100-DMA which is expected to act as support in the near term at Close.

All and all, we are likely to see NIFTY consolidating again and attempting to gain some stability. With the level of 8500 being all important support, any pullbacks will continue to meet with intermittent selling pressures / bouts from higher levels. This will continue to happen until we see clear sign of resumption of up move. This will also keep volatility and choppiness ingrained in the Markets. Selective outperformance will be seen and it is advised to adopt highly stock specific approach in such Markets.

Milan Vaishnav, CMT

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

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, October 17, 2016

Daily Market Trend Guide -- Monday, October 17, 2016

MARKET TREND FOR MONDAY, OCTOBER 17, 2016

The domestic equity markets witnessed a range bound session on Friday and while it ended with very minor gains, the vulnerability continued to remain very much visible on the Daily Charts. Today, we might see a stable opening and some technical pullback as well but in any case, the up moves are likely to remain limited and the level of 8500 would now be the key support levels for the Markets as it also it is a important pattern support and also falls in close vicinity of the 100-DMA which is 8493.

Today, the levels of 8625 and 8660 will act as immediate resistance levels whereas the supports will come in at 8550 and 8500 levels.

The RSI—Relative Strength Index on the Daily Chart is 40.7080 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 derivative front, the NIFTY October futures have 5.57 lakh shares or 2.81% in Open Interest as it continued to see unwinding of long positions in the Markets.

Coming to pattern analysis, the NIFTY has clearly shown a downward breach from the Descending Triangle formation on the Daily Charts. On the Weekly Charts as well, short term weakness remains evident and visible. Returning back to Daily Charts, it is likely that in event of some more weakness, the NIFTY has major support at 8500 level. This is a major pattern and also coincides with 100-DMA which is 8493. This zone should act as major support for the Markets. In event of any technical pullback, the level of 8690 will remain a very stiff and sacrosanct resistance in immediate short term.

All and all, it is also important to note on fact that the while the Markets have declined, it has consistently seen reduction of open interest. This is because of steady unwinding / off loading of long positions. At the same time, a fact needs to be observed that there is no visible creation of major shorts in the system. This requires us to sound some more caution as in event of any further downsides, the NIFTY will see difficulty finding support from the short positions. We reiterate to use all technical up moves in protecting profits and maintain cautious outlook on the Markets.