MARKET TREND FOR TODAY January 27, 2012
The Wednesday’s session remained dominated with rollover centric activities as the Markets ended the day with gains continuing its up move but spent the second half of the session quite directionless. The Markets opened on a positive note but soon pared its gains to trade flat. However, it reversed and remained in mildly rising trajectory maintaining modest gains. The Markets gave its intraday high of 5174.15, but ended the day at 5158.30, posting a modest gain of 30.95 points or 0.60%. With this, it has continued to form a higher top and higher bottom on the Daily High Low charts.
The today’s analysis remained more or less like that of Wednesday but with added quantum of caution in it. The Markets have continued with its up move on Wednesday, but it has done so while being in “overbought” territory and this can be a cautionary sign in the Markets.
The Markets are expected to open on a mildly negative note and look for directions. The intraday trajectory would continue to remain critically important. For today, the levels of 5175 and 5205 shall act as resistance and the levels of 5100 and 5065 shall act as supports.
The January Series of NIFTY saw it rise by over 500 points. Though the rally in the last couple of sessions has remained liquidity driven, it is now “Overbought” while it continued to rise on Wednesday and such technical signs cannot be ignored. The RSI—Relative Strength Index on the Daily Chart is 73.8277 and it continues to remain in “overbought” range. It does not show any negative / positive divergence. The Daily MACD remains bullish as it continues to trade above its signal line.
Having said this, as mentioned above, even though the rally is supported by lot of liquidity, the technical indicators being in overbought range cannot and should not be ignored. Further, all key components of NIFTY have shown decline in Open Interest with the rise on Wednesday, which is a clear indication that some correction / profit taking is imminent in the Markets.
Today, there are all chances that even though the Markets trade in positive, correction / profit taking, even though it may be short lived can creep in. We advice at this juncture to avoid aggressive long positions and vigilantly protect profit at higher levels. Purchases, if any, should be made on highly selective basis in Non-NIFTY stocks. The Markets have risen with small movements between Open and Close – which are known as small real bodies on the Candles, indicates potential discomfort on the Charts. All and all, a cautious outlook is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
