Gemstone Equity Research & Advisory Services

Thursday, December 18, 2014

Daily Market Trend Guide -- Friday, December 19, 2014

MARKET REPORT December 19, 2014

Markets saw a strong technical rebound on back of positive global cues and oversold technical indicators and ended the day with decent gains. The Markets saw a nearly gap up opening as it opened strong. However, the morning trade saw some paring of opening gains as the Markets retraced from the opening highs later in the morning trade. However, the second half of the session saw the buoyancy returning the Markets as the Markets strengthened further to touch the opening levels again. It further went on to form the day’s high of 8174.30 towards the end of the session. These levels were sustained and the Markets finally ended the day at 8159.30, posting a net gain of 129.50 points or 1.61% while forming a sharply higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR FRIDAY, DECEMBER 19, 2014

The remains crucial again as the trend of the Markets would decide if the Markets would continue with its pullback or not. The Markets have ended the day near a pattern resistance. Technically speaking, we can expect a positive start to the session and the Markets are likely to trade positive in the initial trade. It would be important for the Markets to open and trade above 8165 levels in order to successfully continue with the pullback.

The levels of 8175 and 8230 (50-DMA) would act as immediate resistance for the Markets. The supports would come in at 8064 levels.

The RSI—Relative Strength Index on the Daily Chart is 39.9828 and it has just moved above from bottoming area which is bullish. It does not show any bullish or bearish divergence or failure swing. The Daily MACD still remains bearish while trading below its signal line. On Candles, A morning star occurred (this is a three-candle pattern). This is a bullish pattern that often signifies a major bottom.

On the derivative front, the NIFTY December futures have shed over 19.20 lakh shares or over 8.02% in Open Interest. This very clearly signifies that there has been a heavy short covering from lower levels which has fuelled this pullback. It would be extremely important to see that this gets replaced with a fresh buying from here on.

Taking a cue from pattern analysis, the Markets have held on to support at its 100-DMA at Close levels. Though the Markets have seen a technical bounce back, it still faces resistance at 50-DMA. This is the support that the Markets broke on its way down and therefore would act as resistance on its way up. It would be very necessary that the Markets add Open Interest as it is extremely important for the Markets to see fresh buying in order to continue with its pullback. Mere short covering fuelled rallies will not take the Markets much further.

Going on from here, it is extremely necessary to remain highly watchful in the Markets. The Markets have taken a first step towards by giving a technical pullback. It would be necessary that it sees fresh buying going ahead. As the Markets are not yet completely out of the woods, it is necessary to remain highly selective in making fresh purchases. In order to avoid intermediate weakness, it would be necessary for the Markets to move past and close above its 50-DMA. Overall, while maintaining liquidity, positive caution is continued to be advised for the day.

Milan Vaishnav,

Consulting Technical Analyst,
Af. Member: Market Technicians Association (MTA), USA
Af. Member: Association of Technical Market Analysts, INDIA

www.MyMoneyPlant.co.in

http://milan-vaishnav.blogspot.com

+91-98250-16331

milanvaishnav@mymoneyplant.co.in

milanvaishnav@yahoo.com

Wednesday, December 17, 2014

Daily Market Trend Guide -- Thursday, December 18, 2014

MARKET REPORT December 18, 2014

Markets ended the day in the red for the fifth session in a row but also survived a scare in the early morning trade is come off quite a bit from its lows before ending with modest losses. The Markets saw a flat and quite opening and after opening saw a sharp selling pressure in the morning trade. The Markets went down to make the day’s low of 7961.35 in the late morning trade. However, the rest of the session saw a technical rebound as the Markets gradually recovered all of its gains. It recovered over 110-odd points from the lows of the day and also went to trade into the green for a brief time while it formed the intraday high of 8082. It came off a bit again but this time traded in a capped range without posting much losses and finally settled the day at 8029.80, posting a net loss of 37.80 points or 0.47% while continuing to form a lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR THURSDAY, DECEMBER 18, 2014

The session remains a very crucial one as the Markets have closed a notch below its 100-DMA. However, we can expect a modestly positive opening in the Markets as they remain oversold and a technical rebound remains imminent. The levels of 8059 remains crucial and it would be important for the Markets to move past and sustain above 8060 levels in order to avoid any further weakness.

The levels of 8060 and 8130 would act as immediate resistance for the Markets. The supports would come in at 7960 and 7910 levels.

The RSI—Relative Strength Index on the Daily Chart is 28.1640 and it has reached its lowest value in last 14-days which is bearish. However, it does not show any bullish or bearish divergence and it now trades in “oversold” area. The Daily MACD remains bearish as it continues to trade above its signal line.

On the derivative front, NIFTY December futures have added modest 12,400 shares or nominal 0.05% in Open Interest. There have been no major unwinding or shorts were seen in the system.

Taking a look at pattern analysis, the Markets have lost nearly 650-odd points of NIFTY in last couple of sessions while resisting to a upper rising trend line of a broadening formation. During this phase, the Markets have now formed a intermediate top at 8623 levels. However, it has seen over 66% retracement and forms a good case for a technical rebound. The constant addition of short positions and the “overbought” nature of the Markets will aid to this.

Overall, the Markets are due for a technical rebound at any time. It has attempted one while recovering from the lows and is likely to continue its effort as well. It can mildly resist to the 100-DMA levels of 8059-60 but it is likely that it would move past this level. It is critically important for the Markets to move past this level in order to successfully attempt an up move. While very small amounts of selective purchases may be made, overall, positive caution is advised while maintaining liquidity for the day.