MARKET REPORT July
25, 2014
The Markets continued its up move in the seventh day in a
row when it surged in the last hour of the trade to end with some gains after
spending nearly entire session in a capped losses. The Markets opened on a
negative note and traded with capped losses in the morning trade. Later, it
managed to crawl back into the green but lost ground again in the afternoon
trade to form the day’s low of 7771.65. However, the last hour and half of the
session saw strength returning into the Markets when it saw a sudden parabolic
spurt. It not only recovered all of its gains but saw a steep rise taking it to
its fresh highs while forming day’s high of 7835.65. The Markets maintained
these levels until the end and finally ended the day at 7630.60, posting a
modest gain of 34.85 points or 0.45% while continuing to form a higher top and
higher bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
Today’s session again remains critical for the Markets. As
evident on the Daily Charts, the Markets attempted a fresh breakout yesterday
and today it needs confirmation. Today, expect the Markets to open on a flat to
mildly negative note and consolidate in the initial trade. It will need to move
past the levels of 7810-7830 confirm the breakout. Until this happens, the
Double Top formation would continue to act as immediate resistance. However,
any strong breakout shall make the Markets overbought again.
Today, on the higher side, the Markets would be in uncharted
territory. The levels of 7835 would act as immediate resistance and the support
exist at 7765 and 7710 levels.
The lead indicators show a bias towards consolidation. The RSI—Relative
Strength Index on the Daily Chart is 67.2079 and it does not show any failures wings.
However, NIFTY has formed a fresh 14-period high whereas RSI has not, and this
is Bearish Divergence. The Daily MACD remains bullish as it trades above its
signal line.
On the derivative front, the NIFTY July futures have shed
over 3.70 lakh shares or 2.20% in Open Interest. This shows that there has been
some short covering during the spurt that we saw in the last hour and half of
the trade.
Pattern analysis clearly suggest that the Markets tested the
previous highs and have attempted to breakout on the upside. Currently a Double Top formation exists which would pose
immediate short term resistance until the Markets moves past these levels again
form a bottom above that level. This would be the confirmation of the breakout
and until this happens we cannot rule out the possibilities of a consolidation.
All and all, the Markets are poised at a critical juncture.
We continue to advice to make purchases on a very selective note. The cautious approach
in the Markets should be continued and profits should be protected at every
level very vigilantly. While avoiding any fresh shorts, adequate liquidity
should be maintained to absorb any volatility that the Markets are likely to
display.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
