Gemstone Equity Research & Advisory Services

Friday, February 17, 2012

Daily Market Trend Guide -- Friday, February 17, 2012

MARKET TREND FOR TODAY February 17, 2012

The Markets saw a fierce consolidation yesterday where it shed some weight in the middle of the day, but recovered to end the day with negligible losses. The Markets opened on a negative note as expected and remained in the volatile downward trajectory as it went on to give the intraday low of 5483.75 in the afternoon trade. However, in the second half, it saw some recovery, as it recovered to trade flat. It ended the day at 5521.95 posting a negligible loss of 10 points or 0.18%. The volumes remained above average at 1.80 lakh crores but less than the previous session. It has formed a lower top but higher bottom on the Daily High Low Charts.

Today, the tussle between the technicals and the liquidity will continue. There is nothing on charts that warrant a strong opening. However, we are set to see a strong opening today following strong global cues. The Markets are expected to open strong despite contrary technicals and then depend upon its intraday trajectory, if they are to continue with gains or begin a correction.

The levels of 5560 and 5595 are statistical resistance today and supports comes as low at 5400 and 5345 levels.

The lead indicators continue to show the Markets in dangerous condition from technical aspect. The RSI—Relative Strength Index on the Daily Chart is 76.7239 and it continues to remain “extremely overbought”. It is neutral as it shows no negative divergence or failure swings. The Daily MACD continues to trade above its signal line. On the Candles, A Spinning Top has occurred. When this happens during a rally or near highs, as in case with NIFTY, it indicates a potential reversal of trend. This, however needs confirmation.

Another statistical indicator that shows the Markets over-stretched is the NIFTY PCR which is now 1.65, a notch below being overbought.

Having said this, liquidity is likely to continue to chase the Markets, but as often repeated in our previous editions, the correction is imminent and is now “seriously long overdue”, given the above reading. We continue to reiterate to remain ultra selective and stock specific today avoid any king of aggressive positions. When the liquidity stops a mad chase cannot be told, but whenever it does, it gives a violent and sharp correction and this can be harmful to retain investors who potentially get trapped at higher levels. The rise, however fundamentally justified, is technically unsustainable without a correction / consolidation. Therefore, high degree of caution in the Markets should continued to 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 16, 2012

Daily Market Trend Guide -- Thursday, February 16, 2012

MARKET TREND FOR TODAY February 16, 2012

The overbought markets saw a spate of short covering yesterday as it opened on a higher note, went on to give a breakout from the brief consolidation over last couple of sessions and went on to end the day near its highs, while positing robust gains as liquidity continued to chase the Markets. The Markets opened on a positive note and remained in the upward rising trajectory as it went on to give the intraday high of 5542.10. The Markets saw a brief profit taking, but went on to end near its highs at 5531.95 posting a robust gain of 115.90 points or 2.14%. The Markets have went on to give a sharply higher top and higher bottom on the Daily High Low Charts.

For today, expect the Markets to open on a moderately lower note and look for directions. The intraday trajectory would continue to remain the key decider of the trend and there are chances that the Markets consolidates yesterday’s gains.

It is important to note that though liquidity has been wildly chasing the Markets, they continue to remain terribly overbought. Majority of components of NIFTY and other sectoral Indices remain heavily overbought and thus any positions for the retail investor shall bring with it imminent risk of correction anytime. Statistically speaking, the resistance for today is expected at 5560 and 5590 and supports comes as low as 5450 and 5370 levels.

The RSI—Relative Strength Index on the Daily Chart is 77.9877 and is extremely Overbought. The Daily MACD continues to trade above its signal line. The NIFTY PCR is 1.61 as against 1.47.

Though the volumes have been much higher yesterday at 2.49 lakh crores, our advice for today would remain similar to what we have been advising since last couple of sessions. The Markets, though driven by liquidity, are being driven bit madly and has all the potential to trap the retain investor at high levels. Given the technicals, the correction stands imminent and overdue in the Markets. As a consultant, we have no methods to see when liquidity will stop chasing the Markets, but can surely read the technicals which shows the Markets and most of its components heavily “Overbought”. We, therefore, continue to reiterate our advice to the retail investors to stay away from taking aggressive positions. Any purchases should be highly selective and in the non-index components and highly stock specific. High degree of caution is advised for today.