Gemstone Equity Research & Advisory Services

Friday, February 3, 2012

Daily Market Trend Guide -- Friday, February 03, 2012

MARKET TREND FOR TODAY February 3, 2012

Yesterday’s session remained quite volatile as the Markets saw two side swings reacting to the Supreme Court verdict as it cancelled 122 licences of telecom companies but ultimately went on to end the day with modest gains despite unfavourable technicals on account of continuing fund flows. The Markets opened on a positive note and made its intraday high of 5289.95 in the early morning trade. It however, lost ground suddenly reacting to the news as it pared all of its gains and dipped into negative and gave its intraday low of 5225.75. It recovered again, but traded in a range to finally end the day at 5269.90, posting a modest gain of 34.20 points or 0.65%. It has continued to form a higher top and higher bottom on the Daily High Low Charts.

Technically speaking, it has given a breakout from the falling trend line as drawn / shown above. But again, if this is read along with the lead indicators, the analysis remains more or less similar to that of yesterday.

For today, expect the Markets again to open on a flat note and trade range bound in the initial trade. The intraday trajectory would again continue to dominate the trade and the volatility is expected to be seen. For today, the levels of 5300 and 5325 are resistance and the levels of 5190 and 5140 are supports on the Charts.

Having said this, we again would like to draw attention that the lead indicators in the Markets continue to point towards impending correction and immediate weakness. The RSI—Relative Strength Index on the Daily Chart is 71.3410 and it does not show any failure swing and is now in “OVERBOUGHT” territory again. Further, the NIFTY has given its 14-Day high but RSI has no. This is BEARISH DIVERGENCE. The Daily MACD continues to remain above its signal line but on the Candles, A Spinning Top has occurred. During a rally, it usually signals potential loss of momentum in the Markets.

Having said this, again, we reiterate our stand of caution in the Markets. The flow of funds have been driving the Markets but it has got technically dangerous since last couple of sessions and we continue to reiterate that no aggressive long positions should be built as such drives, once over, shows equally sharp correction and there are chances that one gets up trapped with purchases at higher levels. Though stock specific activities would be seen, any long profits should be booked / protected at higher levels and high degree of caution should be exercised.

Milan Vaishnav,

Consulting Technical Analyst,

www.MyMoneyPlant.co.in

http://milan-vaishnav.blogspot.com

+91-98250-16331

milanvaishnav@mymoneyplant.co.in

milanvaishnav@yahoo.com

Thursday, February 2, 2012

Special Edition -- Daily Market Trend Guide -- Thursday, February 02, 2012

MARKET TREND FOR TODAY February 2, 2012

The Markets continued its up move yesterday after spending half of the session in the negative territory on back of some short covering again as it ended the day with modest gains. The Markets opened on a negative note as expected and traded with capped losses for the half of the session. The Markets remained negative until afternoon and also gave its intraday low of 5159. However the last two hours of the trade saw sharp short covering from the lower levels as the Markets went on to trade in positive moving past its 200-DMA to end the day at 5235.70, posting a net gain of 36.45 points or 0.70%. In the process, it has formed a higher top and higher bottom on the Daily High Low charts.
For today, expect the Markets to open into positive again and trade positive at least in the initial trade and then look for directions.

Having said this, we have few very important point to convey. Without going into the daily routine of stating support and resistance levels for the Markets, it would be more important to take note of few important points.

From last few sessions, the Markets have risen defying all technical indicators and other technical readings. As stated number of times in our previous editions, that even though the rally may be liquidity driven, the defiance of the technicals certainly makes the rise unhealthy and poses a threat of equally sharp correction. Further to this, we have noticed few prominent faces on the leading business channel commenting and recommending “buy calls” on certain highly operator driven stocks. These stocks have risen exactly to the extent spoken on the channel even though they have been in extremely OVERBOUGHT condition and this has been done in complete defiance of technicals. No technical or any other factor supported such movements. Such “successful prediction” is possible ONLY IF you are speaking on “behalf of” certain entities who have ultimate goal of offloading such shares at very high levels to the retail investors. As the time passes, the retail investors tend to get trapped at these higher prices. In older times, such tactics were used using the Print Media but now a days, electronic media is used. As a Consultant, it is our duty to draw your attention to such activities and prevent getting carried away with frenzied and dangerous buy calls.

Same is the case with Markets today. The RSI—Relative Strength Index of the Markets on Daily Charts is 69.8588 and it shows no failure swing. But the NIFTY has given a 14-day high, whereas the RSI has not and this is BEARISH DIVERGENCE. The Daily MACD continues to remain above its signal line. Further to this, the NIFTY Futures have shown net decline of 563800 shares or 2.52% in net Open Interest. Therefore, there are no indications, technical or whatsoever nature that warrants and supports and sustains such unabated rise without any consolidation or correction, even if it is liquidity driven.

In light of the above, we strongly continue to recommend to refrain from aggressive buying and keep protecting profits at higher levels. There are chances that we may see a positive opening but the Markets transforms itself into negative trajectory and comes off its highs later in the day, if not today, then tomorrow as some consolidation / correction is long overdue and imminent for the healthy rise to sustain. Overall, very cautious outlook is advised for today.