Gemstone Equity Research & Advisory Services

Saturday, May 14, 2011

Daily Market Trend Guide -- Friday, May 13, 2011

MARKET TREND FOR TODAY

Despite better than expected IIP data, the Markets badly came off its highs and closed with losses and in the process have formed a lower top and lower bottom on the Daily High Low charts.

Today, we are likely to see some respite from the weakness we saw and we are likely to see the Markets stabilize at lower levels due to favorable technicals and also due to important pattern support. For today, expect the markets to open on a flat note and look for direction. It is likely that the Markets may trade in a capped range on either side but are likely to stabilize at these levels.

For today, with the Markets expected to open flat, the levels of 5540 and 5595 are likely to act as resistance and the levels of 5470 and 5450 are likely to act as supports.

All the lead indicators continue to remain in place. The RSI—Relative Strength Index on the Daily Charts is 37.0893 and it shows no negative divergence or failure swings and is therefore neutral. The Daily MACD continues to trade below its signal line.

At this juncture, it is important to take a critical look at some things. The Markets have seen a massive built up of short positions in both NIFTY and Stock Futures. Even yesterday, massive open interest of 11.29% was added with the discount widening to 7points. This makes in evident that massive shorts are created in the Markets. Further more, there is a major pattern support in form of a trend line formed from 5177 levels which shows support at 5475 –5470 levels.

All and all, Markets had no reason to cry foul when it saw better than expected (even if it is QoQ) IIP numbers. Given this, with the huge shorts seen in the Markets and with the Markets trading near pattern supports, its again a matter of time that we see at least short covering and stability returns to the Markets. While strictly avoiding shorts, cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in
+91-9825016331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com

Thursday, May 12, 2011

Daily Market Trend Guide -- Thursday, May 12, 2011

MARKET TREND FOR TODAY

Yesterday's trading session remained a listless session with positive consolidation as the Markets ended the day with modest gains and thereby forming a lower top but higher bottom on the Daily High Low Charts and thereby continuing to remain in consolidation mode on lower volumes.

For today, we may see the Markets opening on a mildly negative note and look for direction on back of soft Global Markets. With the Markets expected to open on a mildly negative note, as like in previous sessions, the levels of 5605 and 5640 shall act as resistance and the levels of 5530 and 5480 shall continue to act as supports.

All lead indicators continue to remain in place. The RSI—Relative Strength Index on the Daily Chart is 41.7793 and it does not show any negative divergence or failure swings and is therefore neutral.

The Daily MACD continues to trade below its signal line but is on its improvement course.

The Markets have been consolidation after making a low of 5472 and is suffering from a feature of typical lack of participation, i.e. lack of retail volumes, a sign typical to consolidation. However, in these couple of sessions, though the Markets have consolidated and remained in a range, the FIIs and DIIs have remained net buyers in both Cash as well as Derivative Segments. Also, massive call writing is observed at 5500 strike price which indicates a strong statistical bottom.

All and all, there are chances that we may see negative opening today, but at the same time, there is all likelihood that we may see improvement from lower levels as the day progresses. It is advised to strictly avoid shorts and use any dip to make selective purchases, while continuing to protect profits at higher levels. However, sustainable up move shall occur only after the Markets moves past the levels of 5600. Cautious optimism is advised for today.