Gemstone Equity Research & Advisory Services

Friday, September 30, 2016

Daily Market Trend Guide -- Friday, September 30, 2016

MARKET TREND FOR FRIDAY, SEPTEMBER 30, 2016

The Markets, at this juncture, need to be analyzed from more than one perspective, both technical and otherwise. The breaking of the news in the afternoon about the India carrying out surgical strikes across LoC spooked the equity markets while they ended with a deep cut on heavy volumes. However, this being said, it should also be borne in mind that apart from geopolitical tensions that sprung up suddenly, the Markets had been demonstrating short term structural weakness on the Daily Charts. We had categorically mentioned the zone of 8780-8820 being the potential stiff resistance levels for the Markets. Though the news broke out in the afternoon, the Markets were already off its highs of 8800.65. However, it is much evident that the developments after than added to the quantum and ferocity of the downside. Today’s Market action will see some more choppiness while the developments in the region are closely monitored.

Speaking purely on technical terms, the levels of 8640 and 8680 will now act as major resistance levels in event of any pullback. Support levels of 8530 and 8485 will be important to watch out for.

The RSI—Relative Strength Index on the Daily Chart is 40.1445 and it has reached its lowest value in last 14-days which is bearish. It does not show any bullish or bearish divergence.

The Daily MACD stays bearish trading below its signal line. On the Candles, there is a contradictory reading. A Engulfing Bearish Candle has occurred. On one hand, it can mark a potential pullback as it has occurred after a decline. On the other hand, the Markets have given a downward breach from a pattern and with a Big Black Candle, this has lent credibility to the downward breach and explicitly more weakness in coming days.

The pattern analysis gives a clearer view as well. The Markets have breached on the downside from a Descending Triangle formation on the Daily Charts after forming a lower top at 8900 levels. If we take a purely technical measuring implication of this development, it would be no surprise if the Markets tests its 100-DMA in coming days. On the other hand, the level of 8680 that it breached will now act as a stiff resistance in event of any pullback.

All and all, though we analyzed a technical picture above, the geopolitical developments will continue to dominate the market movement. The volatility and choppiness will continue to remain ingrained and we strongly advise to preserve cash levels. Though downsides may be utilized to make purchases, all technical pullbacks should be vigilantly used to protect positions. Highly cautious approach with preservation of cash is advised.

Milan Vaishnav, CMT

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

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, September 29, 2016

Daily Market Trend Guide -- Thursday, September 29, 2016

MARKET TREND FOR THURSDAY, SEPTEMBER 29, 2016

The Markets ended the day with modest gains yesterday after struggling in the initial trade and ended the day with modest gains. The levels of 50-DMA has continued to act as support at Close levels and today, this keeps our analysis on the similar lines. The Markets do not seem completely out of the woods as of now and the levels of 50-DMA and 8680 will remain critical levels to watch out for. Any drift below this will bring short term weakness in the Markets. Today is the expiry day of the current derivative series and we will see the session remaining heavily dominated with rollovers.

The levels of 8770 and 8820 will act as immediate resistance levels for the Markets. The supports will come in at 8700 and 8620 levels.

The RSI—Relative Strength Index on the Daily Chart is 50.1787 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD stays bearish while trading below its signal line.

On the derivative front, the NIFTY September futures shed over 33.24 lakh shares or 16.14% in Open Interest while October futures added over 40.34 lakh shares or 29.33% in Open Interest.

If we evaluate the overall short term pattern on the Charts, the Markets have formed a lower top at 8900 levels after marking 8968 as its immediate top. The Markets have taken supports around 8680-8700 range twice and this has formed a small Descending Triangle on the Daily Chart. This is potentially bearish in the short term. To fail this pattern, we will need to see the Markets moving above 8870-8900 levels in order to resist from getting weaker. The support zone of 8680 also coincides with 50-DMA which is 8687 and therefore these levels become critically important levels to watch out for. Any breach below these levels will bring in short term weakness on the Daily Charts.

All and all, even if we see short term up move, the Markets will not be completely out of the woods until it moves past 8870-8900 levels. Until this happens we will see the trading sessions oscillating in a capped range with a negative bias. Today, we might see some consolidation on the Bank stocks while it deals with expectations of a rate cut in coming days. Apart from this, stock specific and sectoral out-performance will continue.