Gemstone Equity Research & Advisory Services

Tuesday, February 20, 2018

MARKET OUTLOOK FOR TUESDAY, FEB 20, 2018

MARKET OUTLOOK FOR TUESDAY, FEB 20, 2018

Start to the fresh week for the Indian Markets remained dismal as the NIFTY continued its corrective mode. It slipped below 100-DMA mark of 10390 on traday basis. However, short covering pulled the Index up by nearly 80-odd points and the NIFTY finally ended the day losing 73.90 points or 0.71%. Going into trade on Tuesday, NIFTY will have limited global cues to track. Major Asian Markets like Hang Seng, Taiwan and Chine remained shut due to lunar week and US Markets will remain shut on Monday due to President day holiday.

Tuesday’s trade is likely to see a tepid opening. If we look from the technical point of view, though the level of 100-DMA was compromised intraday, the NIFTY has defended it by closing just a notch below it. It would be very important for the Markets to crawl back above the 100-DMA mark to be in the safe trajectory.

While we see the levels of 10465 and 10490 playing out as immediate resistance area, very important support zone exists in the 10275-10310 zones.

The Relative Strength Index – RSI on the Daily Chart is 36.1349 and it shows Bullish Divergence as yet again as the NIFTY marked a fresh 14-period low while the RSI did not. The Daily MACD continues to stay bearish while trading below its signal line. No significant formations were seen on Candles.

Pattern analysis shows NIFTY significantly breaching the 10480-10500 support area today. The low was marked at 10308 on Monday after which the NIFTY see significant recovery from lower levels. If we calculate the filters, the levels of 100-DMA has been defended at Close levels.

All in all, the volatility will continue to heavily persist while we approach the expiry. In event of any downsides persisting, the Monday’s low of 10308 and the previous low of 10276 will remain extremely crucial. Any breach will bring in significant weakness. However, we also cannot ignore the fact that large amount of shorts exists in the system. If the NIFTY does not breach the 100-DMA for too long and more so at Close levels, some short covering may get induced. We recommend refraining from shorts as it may create short trap at lower levels. Selective out-performance will continue. We recommend avoiding shorts, keeping exposures at very modest levels and adopt cautious approach to the Markets.

STOCKS TO WATCH:

Fresh shorts were seen on counters like SUZLON, IDFC BANK, SOUTH BANK, ICICI BANK, ADANI POWER, T V18 Broadcast and FEDERAL BANK. Longs were seen being added IDFC, DHFL, RELIANCE, AXIS BANK, YES BANK, INFY, AMBUJA CEMENT and VEDANTA.

Milan Vaishnav, CMT, MSTA
Technical Analyst
(Research Analyst, SEBI Reg. No. INH000003341)

Member:
CMT Association (Formerly known as Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Society of Technical Analysts (STA), UK
www.EquityResearch.asia
http://milan-vaishnav.blogspot.com

+91- 70164-32277 / +91-98250-16331
milan.vaishnav@equityresearch.asia
milanvaishnav@yahoo.com

Monday, February 19, 2018

MARKET OUTLOOK FOR MONDAY, FEB 19, 2018

MARKET OUTLOOK FOR MONDAY, FEB 19, 2018

Indian Equity Markets had a dismal session on Friday. While decoupling from the global markets for all the wrong reasons, the NIFTY came off 178-points from the high point of the day to end the day with a net loss of 93.20 points or 0.88%. Looking from a technical view point, the NIFTY failed to sustained itself above 50-dMA which stands at 10590. On the other hand the Index also drifted below the 10480-10500 support zones.

Monday's opening will be crucial for the Markets. Global markets have been stable and if we see NIFTY sailing past the 10500-mark on Monday, we will see the Index bank into the trading range. However, failure to move past 10500-mark will mean increased possibilities of the NIFTY testing its 100-DMA which stand at 10388.

Monday will see the levels of 10500 and 10565 will see themselves playing out as immediate resistance levels for the Markets. Supports come in at 10430 and 10385 zones.

The Relative Strength Index – RSI on the Daily Chart is 39.0182. It shows a Bullish Divergence as while NIFTY formed a fresh 14-period low, the RSI did not. The Daily MACD too is seen narrowing its trajectory while trading below its signal line. Engulfing Bearish pattern has emerged on Candles. Since it has emerged during an downtrend, it can potentially mark a temporary bottom. However, this formation cannot be read in isolation and it requires confirmation on the following day.

While having a look at pattern analysis it is a matter of concern that the 50-DMA levels have proved to be resistance levels for the Markets. Also, the support zone of 10480-10500 has been compromised to some extent on Friday.

The damage that we saw on Friday was more of sentimental in nature. With global picture in place and stability prevailing in the global markets, we do not see NIFTY breaching the 100-DMA mark as easily as significant shorts is seen in the system. Also we enter the expiry week beginning Monday and some short covering can be expected if the NIFTY does not breach the 100-DMA mark. We would still recommend avoiding shorts, preserving liquidity and holding only modest exposures until a confirmed bottom is formed. Stock specific out-performances are likely to continue.