MARKET TREND FOR TUESDAY, DECEMBER 27, 2016
The start to the trading week remained grossly disappointing
as the NIFTY continued with its slide and tested its Brexit lows, and an
important pattern supports while ending with a loss of 0.97%. The Markets
reacted negatively to the PM’s remarks in Mumbai on Saturday. Today, we
continue to hang in a precarious balance and the behavior of the Markets
vis-à-vis the levels of 7900-7920 zone will decide the trend in remaining week.
There were good amounts of shorts that were added and the NIFTY premium
narrowed to trade almost at par. Today, we expect a fairly stable start but
trading above the levels of 7900 would be crucially important for the Markets.
For today, the levels of 7920 and 7995 will act as immediate
resistance levels for the Markets. The supports will come in at 7950 and 7905
levels.
The RSI—Relative Strength Index on the Daily Chart is
32.1230 and this has reached its lowest value in last 14-days which is bearish.
It does not show any bullish or bearish divergence. This indicator trades near
to its oversold territory but is not yet oversold. The Daily MACD remains
bearish while trading below its signal line.
On the derivative front, the NIFTY December futures have
added yet another 8.06 lakh shares or 5.93% in Open Interest. The decline in
NIFTY with addition of significant open interest indicate addition of shorts in
the system. This is further supported by the reduction in the NIFTY futures
premium to the spot.
Coming to pattern analysis, the NIFTY has declined nearly
300-odd points in previous 8 sessions. It has violated its immediate low of
7920 levels and has closed marginally below this. This level was expected to
act as an important pattern support in form of a minor Double Bottom but with
the NIFTY closing a notch below this, this support level has become an
important point to watch for. For the NIFTY to avoid any serious weakness, it
will have to move and trade above 7900-7920 mark and maintain itself above
that. Any further downsides at Close levels will bring in some more pain in the
immediate short term.
Reading of the structure of the Chart, which is fairly
bearish, some amount of weakness persisting cannot be ruled out. On the other
hand, NIFTY has added good amount of shorts and with the expiry happening in
the current week, technical pullback can also be expected from lower levels.
Though the support of 7900-7920 has not been grossly violated as of now, we
recommend completely refraining from creating any directional exposures until
expiry gets over.
Milan Vaishnav, CMT
Technical Analyst
(Research Analyst, SEBI Reg.
No. INH000003341)
Member:
Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
+91-98250-16331
