Gemstone Equity Research & Advisory Services

Sunday, February 19, 2017

Daily Market Trend Guide -- MONDAY, FEBRUARY 13, 2017

MARKET TREND FOR MONDAY, FEBRUARY 13, 2017

The NIFTY on Friday headed nowhere as it traded 20-odd points range, oscillated on either side and finally ended the day with nominal gains of 15.15 points or 0.17%. Today, we expect the Markets to open on a positive note and look for directions. However, just like entire previous week, the NIFTY50 continues to remain overbought and therefore any runaway sustainable rise may not be expected. Any up move or upward spike will, therefore, continue to remain vulnerable to profit taking pressures from higher levels.

For today, the levels of 8825 and 8900 will act as immediate resistance levels while supports will come in at 8710 and 8650 levels.

The RSI—Relative Strength Index on the Daily Charts is 72.8117 and it remains neutral showing no divergences against the price. However, it trades in overbought territory. The Daily MACD has flattened is trajectory but it is bullish as it trades above its signal line.

However, it is moving towards reporting negative crossover. No significant fresh formation on Candles is observed. However, in previous sessions, an engulfing bearish line followed by a long lower shadow has effectively halted the advance.

The NIFTY February futures have shed just over 75, 525 shares or nominal 0.35% in Open Interest. This figure is too small and insignificant to individually points towards change in any underlying sentiment.

The pattern analysis presents a cautious picture as the NIFTY had been tracking the upper Bollinger band while remaining in overbought territory. Such structure usually results in some short term consolidation or minor correction. Furthermore, even if we see some upward move in NIFTY, it will then lead the Markets towards important pattern resistance levels on the Weekly Charts. This movement along with the overbought nature of the Markets will prevent any runaway rise from occurring.

Overall, we advise to continue to approach the Markets will great caution. Up-moves may be there but they will not be without the vulnerability of profit taking bouts. The Overbought nature of the Markets are primarily likely to prevent any runaway up moves but if such up moves occur, then the sustainability of the higher levels will be in question. Therefore, continuance of approaching the Markets with great caution along with adopting stock specific approach 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

Sunday, February 12, 2017

Weekly Technical Outlook - February 13 thru February 17, 2017

WEEKLY MARKET OUTLOOK FOR FEBRUARY 13 THRU FEBRUARY 17, 2017

The NIFTY ended the previous Week with modest gains of 52.60 points or 0.60% while it played host to lots of volatility in the trade. Since last two weeks, the Markets are grappling with divergent signals the Daily Charts and the Weekly Charts. This has prevented the Markets from giving a run-away rise. The coming week will see the overbought Markets struggling with relatively stable and bouyant Weekly Charts which are also approaching their major pattern resistance levels. We are likely to see stable opening on Monday but the overall structure of the Charts are likely to prevent any runaway rise withough any consolidation or some corrective actions.We have been raising caution of intermediate profit taking bouts and this coming Week will also see such phenomenon prevailing in the Markets.

In the coming week, 8830 and 8945 will broadly act as resistance levels for the Markets. The supports will come in at 8720 and 8650 levels.

The Relative Strength Index – RSI on the Weekly Charts is 62.5292 and it has formed a fresh 14-period high which is Bullish. It does not show any divergence against the price. The Weely MACD is bullish and trades above its signal line post reporting a positive crossover in the previous week. The Candles show a Spinning Top. This often signifies either a indescisive session or a session which continues to witness resistance at higher levels and often leads nowhere.

Pattern analysis draws an important picture. The NIFTY had retraced to 7900-lows post formation of a Double Top formation in September 2016. This is a reversal formation and it did make NIFTY retrace nearly over 1000-odd points as it came off from 8968 levels. The NIFTY is approaching this mark again and even if we see a bouyant intent of the Markets, the breaching of this important pattern resistance level on the upside cannot be without any intermediate corrective activity. More so, when the NIFTY is trading “overbought” on the Daily Charts which makes some broad consolidation or some correction even more likely and imminent.

Overall, despite buoyant intent, we will need to approach this week with extreme caution. One thing that is most likely to be seen would be the profit taking from the sectors that have gained since previous couple of weeks into fresh improving sectors. With the results out for most of the key stocks, we will see such rotation quite evident. Given this reading, and also taking into account the fact that intermittent profit taking bouts will continue to remain imminent, protection of profits at higher levels and effectively rotating the investments will hold the key to the coming expectedly volatile week.

A study of Relative Rotation Graphs – RRG shows NIFTYIT pack will further consolidate it loss of momentum witnessed previous week and will continue to relatively outperform. We had mentioned in our previous Weekly note that the IT Pack is expected to digest the headwinds from the US and will attempt to improve. NIFTY IT ended the previous week with hefty gain of 362.05 points or 3.61%. SMALL CAP, which strengthened its performance previous week, is expected to continue with its relative outperformance along with INFRA stocks. PHARMA remained evidently weak and are likely to remain so on week-on-week basis. We are likely to see gains in REALTH and PSUBANK pack as well. ENERGY is likely to further slowdown its pace along with METAL stocks. We will also see select outperformance from the FMCG pack as well.

Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY Index and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)