Gemstone Equity Research & Advisory Services

Friday, August 5, 2016

Daily Market Trend Guide -- Friday, August 05, 2016

MARKET TREND FOR FRIDAY, AUGUST 05, 2016

Markets traded precisely on expected lines yesterday as though it opened higher, it came off immediately from its opening highs to end day flat with minor gains. The levels of 8580-8600 acted as resistance yesterday. Today, we are likely to see a positive start to the Markets but the levels of 8600-8620 will continue to act as important pattern resistance to the Markets on Daily Charts. The ECB has kick started stimulus and this QE will result into risk assets continuing to remain in demand.

For today, the levels of 8580-8620 will act as immediate resistance levels for the Markets. The supports come in at 8520 and 8460 levels.

The RSI—Relative Strength Index on the Daily Chart is 56.3817 and it remains neutral as it shows no bullish or bearish divergence or any failure swing. The Daily MACD stays bearish as it trades above its signal line.

On the derivative front, the NIFTY August has shed 2.88 lakh shares or 1.20% in Open Interest. The NIFTY PCR stands at 0.88 as against 0.87.

Coming to pattern analysis, as mentioned in our yesterday’s edition, the NIFTY has breached on the downside from the Channel that is drawn from the February lows. The level of 8580 was important to watch out for as it was the pattern support that the Markets breached on the downside. This level continued to act as resistance yesterday as well. Given the rising nature of the level, the levels of 8600-8620 will be critical to watch out for. Until the Markets move past these levels in the immediate short term, we will see them in corrective mode and they will continue to consolidate in a capped range.

Overall, with the levels of open interest addition witnessed in Puts yesterday, even a small up move is likely to trigger a serious short covering in the Markets. Over last 3-4 sessions, significant short positions have been added in the system. Given this reading, caution obviously gets elevated in the Markets. The Markets are likely to remain volatile and remain vulnerable to intermittent selling from higher levels until some critical levels are surpassed and the Markets get back into its upward momentum. Meanwhile which accepting 8680-8700 as its immediate top, cautious approach should be continued in the Markets.

Milan Vaishnav, CMT

Technical Analyst

Member: Market Technicians Association, (MTA), USA
Member: Association of Technical Market Analysts, (ATMA), INDIA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Thursday, August 4, 2016

Daily Market Trend Guide -- Thursday, August 04, 2016

MARKET TREND FOR THURSDAY, AUGUST 04, 2016

The Markets finally corrected and tested its important pattern supports levels while ending the day with losses. Today, we will see the Markets reacting to the GST bill getting passed and might see some initial reaction to it. Today, we can fairly expect to see a positive start to the Markets and we will see Markets trading with gains at least in the initial trade. However, while speaking purely on technical terms, it would be critical to see the Markets trading above important levels of 8580 so as to be back again in the trading channel.

Today, the levels of 8590 and 8635 will act as immediate resistance levels for the Markets. The supports come in lower at 8510 and 8465 levels.

The RSI—Relative Strength Index on the Daily Chart is 55.8868 and it has reached its lowest value in last 14-days which is bearish. Furthermore, the RSI has set a fresh 14-day low while NIFTY has not yet and this is Bearish Divergence. The Daily MACD stays bearish as it trades below its signal line.

On the derivative front, the NIFTY August futures have added over 11.95 lakh shares or 5.24% in Open Interest. The NIFTY PCR stands further down at 0.87 as against 0.91.

Coming to pattern analysis, the Markets not only tested its lower pattern support of 8580-8560 but breached it as well yesterday. On its way up the level of 8580 is likely to act a short term resistance. On the other hand, it would be critically important for the Markets to bounce back and trade above 8580 levels so as to be back in the Channel. With each passing day, this level would increase given the rising nature of the channel. The lead indicators suggest the Markets remaining in consolidation / minor correction for some more time and the levels of 8675-8700 will remain sacrosanct as a immediate top for the Markets in the immediate short term.

Overall, we will see some sentimental bounce back in the Markets in the initial trade. The key would be to see if the Markets are able to capitalize on this expected positive opening and move beyond 8580 levels. Failure to do this will keep the Markets in corrective mode for some more time in the short term, even though, the overall downsides remain limited. It is important to note that volatility in the Markets will continue to remain ingrained and we will continue to see stock specific activities dominating the session.