Gemstone Equity Research & Advisory Services

Wednesday, November 16, 2016

Daily Market Trend Guide -- Wednesday, November 16, 2016

MARKET OUTLOOK FOR WEDNESDAY, NOVEMBER 16, 2016

Indian Equities had a terribly disappointing session yesterday as it opened much lower than expected and domestic factors weighed heavy on the Markets as NIFTY went on to test its 200-DMA and ended a notch below it while it ended yet another day with a deep cut. Speaking purely on technical terms, we can fairly expect a technical pullback today. First, the NIFTY is yet within the filter of its 200-DMA support and secondly it stands “oversold” as clearly evident on the lead indicators. However, local factors like Demonetization, etc. would still weigh on the Markets which is certain to keep it volatile.

For today, the levels of 8165 and 8235 will act as immediate resistance levels on the Daily Charts. The supports will come in at 8090 and 8025 levels.

The RSI—Relative Strength Index on the Daily Chart is 27.4575 and it does not show any bullish or bearish divergence. Though it has reached its lowest value in last 14-periods which is Bearish, it clearly remains now in “oversold” territory. The Daily MACD stays bearish as it continues to trade below its signal line.

On the derivative front, the NIFTY November futures have over 20.17 lakh shares or massive 11.52% in Open Interest. This makes hugely evident that massive shorts have been added and this is likely to lend good support to NIFTY at current levels.

Coming to pattern analysis, the NIFTY has ended below its 200-DMA. This is technically bearish but the singular reading of this would be incorrect. It is important to note that NIFTY is still within its filter of its critically important support. Furthermore, the lead indicators clearly show the NIFTY now trading in “oversold” territory. Though it is possible that a issue can trade “oversold” while continuing its downtrend, the huge addition in OI also indicates that it is likely to keep its downsides limited.

All and all, it is very much likely that the NIFTY does not test its immediate previous lows. Even if any intraday bouts occur, now we remain very clearly and evidently exposed to a short covering technical relief rally. Even if the NIFTY continues with its bearish moves, we very categorically advice investors to refrain from creating any major short positions. It should be noted that a technical bounce back is long overdue and imminent even if we remain in a continuing downtrend. Overall, while avoiding shorts and major exposures, cautious but optimistic view is advised for today. Downsides, if any, should once again be continued to be used to make select purchases.

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

Tuesday, November 15, 2016

Daily Market Trend Guide -- Tuesday, November 15, 2016

MARKET OUTLOOK FOR TUESDAY, NOVEMBER 15, 2016

The NIFTY ended the session on Friday with a deep cut and gave back nearly a third of its prior two day’s recover, it still showed continued negative ending on closing basis. Today, we can expect some stability to return to the Markets. Opening is expected to be quiet and though we may see intraday volatility, the downsides to the remains limited any dips will remain open to improvement as we go ahead in the session. The levels of 8460 will remain important pattern resistance for the Markets to watch for.

For today, the levels of 8375 and 8460 will act as immediate resistance levels for the Markets. The supports come in at 8275 and 8240 levels.

The RSI—Relative Strength Index on the Daily Chart is 33.5323 and it does not show any failure swing. The NIFTY has set a fresh 14-period low on Closing basis but RSI has not and this has formed a Bullish Divergence on the Daily Charts. The Daily MACD stays remains bearish as it trades below its signal line. On the Candles, a formation akin to abandoned baby has formed. However, this would be less effective and damaging as it has not occurred after a rally and has occurred during a downtrend.

On the derivative front, the NIFTY November future have added over 4.93 lakh shares or 2.90% in Open Interest. This signifies that fresh shorts have been added as the decline has come along with addition in Open Interest.

Coming to pattern analysis, it is evident that the NIFTY has given a downward breakout from the falling channel formed since 8968 levels. The return line (Support line or the Lower Line) of that channel which was acting as support will now act as its resistance on NIFTY’s way up. That level is 8460 today as is declining. Having said this, it is also important to note that the NIFTY is near its pattern support on its Closing Charts and downsides from current levels remain very limited.

All and all, even if we continue to remain in continuing downtrend, there are high possibilities of a technical pullback in today’s session or in sessions to come. It is reiterated to continue to use all downsides to make select stock specific purchases. Shorts should be avoided as short trap may occur. Overall, which maintaining a cautious view on the Markets, optimistic outlook is advised for today.