Follow up on Daily Market Trend Guide dated April 15, 2011

Follow up

Even with the Markets closing with robust gains on Wednesday, (Thursday being a holiday) and ended the day with robust gains, we had categorically mentioned in our edition of Daily Market Trend Guide dated April 15, Friday that not a single technical factor is in favor of any sustainable up move. The April 15th Edition is reproduced below for yor quick reference.

We had catagorically mentioned that "...Even with the Markets ending at high point of the day, there are certain important things that should not be overlooked. 

First, the RSI—Relative Strength Index on the Daily Chart is 65.5872. It does not show any failure swing but NIFTY has given its 14-day high but RSI has not. This is BEARISH DIVERGANCE. On the Candles, Engulfing Bullish Pattern has occurred. When this occurs during an uptrend, which is the case with NIFTY, it may be the last engulfing top which indicates a potential top. This, however needs confirmation that the potential weakness may creep in.

Further, what signifies the rise as short covering is the fact that NIFTY 5900 Call saw shedding of OI and 5800 Put saw addition of Open Interest.  Further to that, the levels of 5944 continue to act as immediate top. The Markets will see sustainable up move only after bottom of 5944 and any such up move shall make the Markets OVERBOUGHT again...."

Keeping the above mentioned analysis in view, the Markets behaved perfectly in the manner expected and described above. Not only it did not went above 5944 as it reported a day's high of 5907.35, it spent the entire  in negative falling trajectory and ended the day near the low point of the day.

At this jucture, with shorts being added again, apart from short covering, the immediate supports for the markets are near its 200 and 100 DMAs at 5724 and 5707 respectively.

Watch this space for a detailed Daily Market Trend Guide, unarguably one of India's most acclaimed, on Monday morning before Market opens.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in 
+91-9825016331

milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com

Daily Market Trend Guide -- Friday, April 15, 2011 (Which our Clients received in the Morning before markets opened)

MARKET TREND FOR TODAY

The Markets saw a huge spate of short covering on Wednesday and as a result, after opening on a lower note, closed near the high point of the day with robust gains and as a result have formed a sharply higher top but lower bottom on the Daily High Low Charts.

Today’s session will be critical session for the Markets. For today, even when the Markets have closed near the high point of the day, expect the Markets again to open on negative note and look for directions.

The levels of 5944 will continue to act as immediate top and resistance and further the Markets may find resistance at 5960. The levels of 5850 and 5800 may act as supports. Even with the Markets ending at high point of the day, there are certain important things that should not be overlooked.

First, the RSI—Relative Strength Index on the Daily Chart is 65.5872. It does not show any failure swing but NIFTY has given its 14-day high but RSI has not. This is BEARISH DIVERGANCE. On the Candles, Engulfing Bullish Pattern has occurred. When this occurs during an uptrend, which is the case with NIFTY, it may be the last engulfing top which indicates a potential top. This, however needs confirmation that the potential weakness may creep in.

Further, what signifies the rise as short covering is the fact that NIFTY 5900 Call saw shedding of OI and 5800 Put saw addition of Open Interest.  Further to that, the levels of 5944 continue to act as immediate top. The Markets will see sustainable up move only after bottom of 5944 and any such up move shall make the Markets OVERBOUGHT again.

All and all, there is no need to get carried away with the rise due to the factors explained above. It is advised to continue to maintain very stock specific approach while protecting longs at the higher levels. Cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in
+91-9825016331

milanvaishnav@mymoneyplant.co.in 
 milanvaishnav@yahoo.com