Gemstone Equity Research & Advisory Services

Tuesday, December 20, 2016

Daily Market Trend Guide -- Tuesday, December 20, 2016

MARKET TREND FOR TUESDAY, DECEMBER 20, 2016

Indian equities headed nowhere on Monday for the most part of the session but slipped in the last hour of the trade to ended once again with modest losses. The NIFTY remained in 20-odd points range for the entire session but the last hour of the trade saw it losing ground. Today, we can expect some stability to return to the Markets. We can expect flat to modestly positive opening. This will require support from external technical factors and we expect some tapering of yields in the US Bonds to aid to these expectations. As of now, the 200-DMA of the NIFTY which stands at 8227 to act as important resistance for the Markets while it struggles to confirm its reversal.

For today, the levels of 8175 and 8225 will act as immediate resistance while the supports will come in at 8075 and 8030 levels.

The RSI—Relative Strength Index on the Daily Charts is 42.4568 and it continues to remain neutral while showing no bullish or bearish divergence. It also does not show any failure swing. The Daily MACD remains bullish while trading above its signal line. No major formation was observed on Candles.

On the derivative front, the NIFTY December futures have continued to shed over 3.04 lakh shares or 2.05% in open interest. This implies continuation of unwinding / offloading of positions.

Coming to pattern analysis, the reading remains more or less similar as no major changes in pattern is observed. Post formation of lows at 7968 levels, the NIFTY has reversed its trend but has not confirmed its reversal. It has failed to sustain above its 200-DMA as of today and this remains a cause of major concern. There is no major structural breach on the Daily Charts but in the same breath, we do not expect any runaway rise to occur until the NIFTY shows some signs of buying at lower levels. Currently, it trades in a broad trading range heading nowhere.

Overall, just like as we mentioned yesterday, we do not see any structural breach and this makes it clear that shorts at any levels should be avoided. So far as making fresh purchases is concerned, it should be done in limited quantities maintaining more amount of cash and liquidity as the NIFTY still rules below 200-DMA. Sectoral outperformance will be evident and pockets like IT and select midcaps are likely to continue to out-perform.

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, December 19, 2016

Daily Market Trend Guide -- Monday, December 19, 2016

MARKET TREND FOR MONDAY, DECEMBER 19, 2016

The Friday’s session saw the NIFTY going nowhere as the Markets opened modestly higher, came off in the morning trade itself and spent rest of the entire session trading in sideways trajectory in a capped range and ending with modest losses. Today as well, we keep our analysis on similar lines. The NIFTY might see a flat to mildly negative opening and it is likely to continue to resist to the rising trend line drawn from 7928 lows as it currently trades below that. On the way up, this trend line and then the 200-DMA will continue to pose resistance on the Daily Charts.

For today, the levels of 8180 and 8220 will act as immediate resistance levels which supports are likely to come in at 8105 and 8065 levels.

The RSI—Relative Strength Index on the Daily Chart is 44.5156 and they are neutral and show no failure swings or any type of bullish or bearish divergence. The Daily MACD is bullish as it trades above its signal line. On Candles, no significant formations are observed as of today.

On the derivative front, the NIFTY December futures have shed over 7.09 lakh shares or 4.55% in Open Interest. Unwinding / offloading of longs is evident from these figures. It would be critical to see if these are replaced by fresh longs going ahead.

Coming to pattern analysis, the NIFTY has managed to form a temporary base at 7928 levels which remain the current lows. The NIFTY has been making attempts to pullback and confirm this bottom but it has not done so successfully so far. Firstly, it has breached the rising trend line drawn from 7928 lows and now currently trades below that. Secondly, it continue to trade below 200-DMA as well. For the NIFTY to resume its up move and successfully mark a bottom, it will need to move past 200-DMA which is 8221 today and comfortably sustain above that. So long as this does not happen, we will continue to see the

Markets consolidating in a broad range and going nowhere.

Overall, the NIFTY is currently under consolidation but it is important to note that there is no structural breach on the Daily Charts as yet. Just that the NIFTY trades below its key resistance levels. In the given circumstance major shorts should be avoided. On the other hand, the bond yields in US are steadfastly maintaining their gains and showing no signs to retreat. Also, the F&O data shows reduction in positions in the Markets. This may hold back the NIFTY for some time. It would be critically important to see if the fresh longs are added. The sum-total view of this is that NIFTY currently remains in no-trade zone. Shorts should be strictly avoided and downsides will see select purchases happening as sectoral churning is evidently seen in the Markets.