Gemstone Equity Research & Advisory Services

Thursday, March 8, 2018

MARKET OUTLOOK FOR THURSDAY, MAR 08, 2018

MARKET OUTLOOK FOR THURSDAY, MAR 08, 2018

The Indian Equity Markets remained much weaker today and continued with its slide as the benchmark NIFTY50 ended the day with net loss of 95.05 points or 0.93%. What was technically important today was that the NIFTY tested its 200-DMA which is expected to act as major support. The 200-DMA level stands at 10131.

Markets currently remain precariously poised. The weakness was dominant on Wednesday’s trade as the NIFTY showed no inclination to pullback despite being whisker away from the major support zone of 200-DMA. While we approach the trade on Thursday, we have to approach it with a two diverse facts in mind. First, the weakness in the general markets is not showing any signs of backing off. Secondly, the NIFTY trades oversold on major indicators and we have seen high amount of shorts that have been built in the system which can make short covering imminent.

Thursday will see the levels of 10225 and 10270 acting as immediate resistance zone for the Markets. Supports come in at 10100 and 10010 levels.

The Relative Strength Index – RSI on the Daily Chart is 30.9247 and it has got nearly oversold. It has marked a fresh 14-period low which is bearish. The Daily MACD stays bearish while trading below its signal line. No significant patterns were observed on Candles.

Pattern analysis clearly indicates that the NIFTY has broken down from the brief trading range that it formed during it recent declines. It has breached the support zone of 10276-10300 and currently stands in extremely close vicinity of 200-DMA.

If read in isolation, the structural weakness is now seen evidently on the Charts. However, what forces us to wait for a very imminent technical pullback is that the lead indicators are oversold. Coupled with this, we have created very significant amount of short positions over last couple of days. Further, if we look at all sector and broader Market indices, they all are either deeply oversold, or are seen taking support at its 200-DMA.

In view of the above facts, we would strongly recommend trades to move out of any major short positions. There are chances of a technical pullback and the behavior of the Markets vis-à-vis the 200-DMA at Close levels will be immensely important. Resilient relative outperformance can be expected from select Auto, Metals and FMCG components.

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

Wednesday, March 7, 2018

MARKET OUTLOOK FOR WEDNESDAY, MAR 07, 2018

MARKET OUTLOOK FOR WEDNESDAY, MAR 07, 2018

The session on Tuesday remained thoroughly disappointing as the NIFTY plunged to a fresh 2018 lows and slightly violated its important support zone of 10276-mark. The NIFTY traded with modest gains all throughout the session but the last hour and half of trade saw the Markets rapidly paring gains and the benchmark ended the day with net loss of 109.60 points or 1.06%.

Going into trade on Wednesday, Markets face a acid-test. The support zone of 10276 stands slightly violated. The NIFTY reacted after it tested the 100-DMA level in the morning trade. Currently the Markets remain very precariously poised as on one hand it is likely to slip further which may take it to test 200-DMA and on the other hand, the Markets also sit on very large number of short which may lead to short trap going further. In any event, the behavior of the Markets vis-à-vis the levels of 10300 will be important to watch for.

The levels of 10310 and 10365 will act as immediate resistance area for the Markets. On the other hand, supports come in at 10210 and then further lower at 10127 mark.

The Relative Strength Index – RSI on the Daily Chart is 34.2577 and it has marked a fresh 14-period low which is bearish. It does not show any divergence against the price. The Daily MACD continues to stay bearish while trading below its signal line. A big black body emerged on the Candles. This has lent credibility to the resistance area of the 100-DMA mark.

While having a look at pattern analysis, NIFTY has slightly violated the support area of the 10275-mark and has ended a notch below that. This translates into violation of the small rectangle pattern that the NIFTY has developed after its recent decline.

Overall, the levels of 10275-10300 will remain extremely crucial to watch for. The longer the NIFTY stays below 10300 mark, higher will be the chances of it getting weaker and testing the 200-DMA levels. On the other hand, NIFTY will avert any weakness if it manages to crawl back above the 10300-mark. The global markets trade extremely stable. Though the Indian Markets remain sentimentally weak owing to domestic reasons, it is not likely to remain decoupled with global stability for long time. Given the massive amounts of shorts that still continue to get piled up each day, we advice participants to not to create any fresh shorts at current levels. Staying away and remaining light on exposures is what is advised while adopting a highly cautious view on the Markets.

STOCKS TO WATCH:

Large amount of short positions were seen being added on counters like STEEL AUTHORITY, ICICI BANK, JP ASSOCIAT, STATE BANK, DISH TV, AXIS BANK, RCOM, ITC, HINDALCO, LARSEN & TOUBRO and DLF.

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