Gemstone Equity Research & Advisory Services

Sunday, February 19, 2017

Daily Market Trend Guide -- Friday, February 17, 2017

MARKET TREND FOR FRIDAY, FEBRUARY 17, 2017

The Equity Markets had a somewhat positive session yesterday as the benchmark NIFTY50 rebounded from the intraday lows after a initial soft opening and ended the day with modest gains. Today, we expect a positive start and expect the positivity to persist at least in the initial trade. In yesterday’s session, NIFTY established two things. First, it defined the consolidation zone of 8675-8820 and also held out the importance of the 8820-8830 zones as immediate resistance levels as well. Even if we see some up moves, the 8820-8830 zones will continue to hold out as important hurdle for the NIFTY. We will not see any sustainable resumption of up move until these levels are moved past and until this happens, consolidation will continue to persist.

For today, 8830 and 8895 will pose resistance to the Markets. The supports come in lower at 8720 and 8650 levels.

The Relative Strength Index – RSI on the Daily Chart is 66.2802 and it remains neutral as it shows no bullish or bearish divergence as against the price or any failure swings. The Daily MACD is bearish post reporting a negative crossover yesterday. No significant formations are observed on candles.

The NIFTY February futures shed over 4.71 lakh shares or 1.88% in Open Interest. This signifies that short covering occurred post soft opening which led to the rally in the NIFTY. It would be critical to see that such short covering continues and it is eventually replaced with fresh longs in the system.

The pattern analysis now clearly defines a congestion zone. Post halting the up moves in the 8820-8830 area, the NIFTY fiercely consolidated at Close levels for nearly six sessions and then posted some minor losses. In this manner, the 8820-8830 zones established itself as a immediate short term resistance and the bouncing back of the Markets from the supports of 8700-8720 established the lower support area for the NIFTY. So long as the consolidation continues, we will see the NIFTY oscillating between 8675-8725 on the lower side and 8820-8830 zones on the upper side.

All and all, we expect some up move to continue in the Markets but at the same time, the levels of 8820-8830 will continue to pose resistance to the Markets. As mentioned earlier, for a fruitful and sustainable up move, the levels of 8820-8830 need to be breached on the upside. The positivity is likely to be aided by softening of the bond yield and better performance in the overall global equity set up. Stock specific purchases will be seen. Adopting stock-specific and selective approach with positive bias is advised for the day.

Milan Vaishnav, CMT

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Daily Market Trend Guide -- Thursday, February 16, 2017

MARKET TREND FOR THURSDAY, FEBRUARY 16, 2017

The Indian Equities traded precisely on projected lines and after fierce consolidation at close levels, it saw some correction as well while it ended the day with a loss of 67.60 points or 0.77%. It becomes important to note at this juncture that this corrective activity was imminent and long overdue and in fact will turn out to be healthy for the Markets going ahead. Today, we can expect a subdued opening and the spiking of the US Bond Yields may still have its lingering effect on Indian Equities but in the immediate short the Markets have limited downsides and may turn up again after brief corrective action. While a subdued opening is expected, Markets are likely to find strong supports at lower levels and might improve as we go ahead in the session. Resilience is expected for the Markets and more so given the buoyant set-up of the correlated peers as well.

For today, the levels of 8775 and 8830 will continue to act as immediate resistance levels. The supports will come in at 8690 and 8665 levels.

The Relative Strength Index – RSI on the Daily Chart is 62.7479 and it has just crossed below from a topping formation. Also it has reached its lowest value in last 14-periods which is Bearish. A Bearish Divergence is also seen as the RSI has set a fresh 14-period low while the NIFTY has not yet. The Daily MACD has reported a negative crossover and it now trades below its signal line. We had projected this happening in our yesterday’s note.

On the other hand, the NIFTY February futures have added over 17.40 lakh shares or whopping 7.45% in Open Interest which very clearly indicates creation of massive short positions in the system.

The pattern analysis paints a obvious picture. After oscillating in a broad range and with flat endings at Close levels, the NIFTY was witnessing fierce consolidation over last six sessions. Some corrective activity was imminent as the NIFTY was also trading in overbought terrain during this time. Any up move without any correction would have taken Markets higher but would have made them equally unhealthy. The corrective action that we witnessed yesterday will in fact prove to be healthy for the Markets in the immediate short term.

All and all, though the lead indicators show some persistence of weakness and some amount of pressure may also persist because of spike in US Bond Yields in last two sessions, we expect limited downsides to the Markets. Any downsides that we may see might be temporary as the NIFTY has added huge amount of shorts over last two days. While remaining light on overall positions, we also advice refraining from creating any major short positions as short squeeze may occur at lower levels. While maintaining cash and liquidity, modest purchases may be made at lower levels.