MARKET REPORT June
06, 2014
In what seemed to be a session wherein the Markets would
have consolidated, turned out to be yet another session wherein the Markets
continued to surge upwards while closing at fresh highs and doing so while continuing
to shed open interest and defying technicals. The Markets expectedly opened on
a quiet note and after remaining in the green for a very brief period, it slipped into the red while
forming its day’s low of 7360.50 in the morning trade. However, immediately
after this, the Markets transformed itself into rising trajectory and kept
recovering from its lows and by afternoon trade, traded flat. The Markets went
on to further its recovery by trading positive and by end of the session, went
on to form the day’s high of 7484.70. It finally ended the day at 7474.10,
posting a decent gain of 71.85 points or 0.97% while forming a higher top but
lower bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
Today as well, expect the Markets to open on a flat to
mildly positive note and trade positive at least in the initial trade. By now,
the Markets have been trading in “overbought” territory and it has been
constantly shedding Open Interest since last several sessions. There are high
chances that the Markets opens positive but later pares its gains as we go
ahead in the session.
Today, the levels of 7495 and 7530 would act as immediate
resistance for the Markets. The supports exist much lower at 7390 and 7340
levels.
The lead indicators continue to paint a sorry picture on the
Daily Charts. The RSI—Relative Strength Index on the Daily Chart is 74.9364 and
it does not show any failure swings. However, the NIFTY has set a new 14-day
high while RSI has not and this is clear Bearish Divergence. Further, it
continues to trade in “Overbought” territory. The MACD has reported a positive
crossover and now trades above its signal line. On the Candles, an engulfing
bearish line has occurred. If the engulfing bearish occurs
during an uptrend which is the case with NIFTY, it may be a last engulfing
top which indicates a formation of a potential top. However, this requires
confirmation today.
On the derivative front, the NIFTY June futures have shed
over 10.73 lakh shares or 7.10% in Open Interest. This very clearly signifies
that the Markets have risen on back of short covering yesterday and no clean
buying has been reported.
Going by the pattern analysis, the Markets are attempting to
reach its double top formation on the bar charts but continues to remain in “overbought”
territory. Given this reading, it is likely that it tests its double top
resistance level but very less likely that it will go on to give a breakout on
the upside. With the Markets remaining “overbought”, it is likely that the
Markets would see a correction from higher levels which is very imminent and
long overdue.
All and all, given the above reading, the Markets are
trading at precarious levels and with the lead indicators continuously pointing
towards long overdue correction, profits should be protected at higher levels
and over leverage should be avoided. While maintaining ultra caution of making
new purchases, it should be done on a very selective basis. While maintaining
more liquidity, continuance of high degree of caution is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
