Gemstone Equity Research & Advisory Services

Tuesday, February 21, 2012

Daily Market Trend Guide -- Tuesday, February 21, 2012

MARKET TREND FOR TODAY February 21, 2012

The Markets continued to end the day with gains but showed some signs of weariness as it ended the day after coming off its highs. The Markets opened strong on Friday and gave its intraday high of 5606.70 and then continued to trade in a capped range until afternoon trade. The Markets pared much of its gains in the late afternoon trade and ended the day after coming off its highs at 5564.30, posting yet another moderate gain of 42.35 points or 0.77%. With this, it has formed a sharply higher top and higher bottom on the Daily High Low charts and has ended the week with net gains of 182.70 points or 3.37%.

For today, expect a quiet start in the Markets. The Markets are expected to open on a quiet note and are likely to consolidate. With the Markets coming off its highs on Friday and with a quiet and moderately lower start expected the levels of 5610 shall act as immediate top for the Markets and we have to see again if it corrects or consolidates here.

For today, the levels of 5580 and 5610 shall act as resistance and the support comes in at as slow as 5450 and 5410 levels.

All lead indicators continue to remain overbought. The RSI—Relative Strength Index on the Daily Chart is 78.3258 and continues to remain grossly overbought. It has reached its highest value in last 14-days and is bullish. However, it does not show any negative or positive divergence. The Daily MACD continues to trade above its signal line. On the Weekly Charts, the RSI is 61.4697 and that too has reached its highest value in last 14-weeks.

Having said this, it would be important to see that the Markets consolidates or corrects at these levels. This is because, whatever the weekly charts say, the Daily Charts are very much overstretched and the lead indicators are grossly overbought. Further to this, this is expiry week and we are also likely to see the Markets remaining dominated with rollover activities.

All and all, we continue to advice high degree of caution. The Markets behaviour on the upside has been quite erratic, the market breadth negative on Friday and with quiet start today, any unabated rally would get dangerous with each passing day and the correction would remain imminent and long overdue. Overall, cautious approach to the Markets advised for today with protection of profits at current levels.

Milan Vaishnav,

Consulting Technical Analyst,

www.MyMoneyPlant.co.in

http://milan-vaishnav.blogspot.com

+91-98250-16331

milanvaishnav@mymoneyplant.co.in

milanvaishnav@yahoo.com

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.