Gemstone Equity Research & Advisory Services

Friday, October 7, 2016

Daily Market Trend Guide -- Friday, October 07, 2016

MARKET TREND FOR FRIDAY, OCTOBER 07, 2016

In our yesterday’s edition, we had mentioned about the domestic equity markets remaining vulnerable to a profit taking bout from higher levels. While trading precisely on the analyzed lines, the NIFTY came off from its intraday highs by nearly 97-odd points to finally end the day with modest losses. Today, we expect a stable opening but also expect that the choppiness and volatility would continue to persist. The NIFTY continues to trade inside the Descending Triangle formation but the neckline support levels of 8690 also coincides with 50-DMA which is 8704. These two levels will continue to act as a major support for the Markets.

For today, the levels of 8745 and 8800 will act as immediate resistance levels whereas the supports will come in at 8690 and 8620 levels.

The RSI—Relative Strength Index on the Daily Chart is 48.6811 and it remains neutral showing no failure swings or any bullish or bearish divergence. The Daily MACD continues to remain bearish while trading below its signal line.

On the derivative front, the NIFTY October futures have shed over 2.07 lakh shares or 0.93% in Open Interest.

While having a look at pattern analysis, though it remains very much evident that the Markets continue to remain trapped in a small Descending Triangle formation, it hangs precariously in a manner that will cause the NIFTY to take a sharp directional bias in coming days. The neckline levels of this formation is 8690. If the NIFTY breaches this level, we will see some more weakness coming in. On the other hand, this neckline level, as mentioned above, also coincides with the 50-DMA levels which stands at 8704. This is expected to act as important support for the Markets at Close levels.

All and all, today the session is likely to remain volatile and on the upper side, the levels of 8800 will continue to pose stiff resistance. In the same breadth, the level of 8690 will be the critical level to watch out for NIFTY will have to trade above this to avoid any weakness. Stock specific purchases may be down but all up moves should be utilized to protect profits as intermittent selling bouts still cannot be ruled out at higher levels.

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, October 6, 2016

Daily Market Trend Guide -- Thursday, October 06, 2016

MARKET TREND FOR THURSDAY, OCTOBER 06, 2016

Choppiness prevailed in the domestic equity markets as it remained volatile in a given range. As mentioned in our yesterday’s edition, the zones of 8800-8850 posed resistance as the Markets all of its opening gains once it resisted at 8806 levels. We keep our analysis more or less on similar lines again as the NIFTY remains trapped in Descending Triangle formation and therefore today, and for coming sessions, the zone of 8800-8850 will continue to pose critically stiff resistance.

For today, the level of 8775 and 8810 will act as immediate resistance while supports will come in at 8690 and 8665 levels.

The RSI—Relative Strength Index on the Daily Chart is 51.0806 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 Candles, and engulfing black candle has occurred following a doji / long lower shadow. This has a potential to bring in short term weakness. However, this needs a confirmation on the following day.

On the derivative front, the NIFTY October futures have added just over 1 lakh shares in Open Interest. There is no significant unwinding of positions that was seen in the Markets.

While having a look at pattern analysis, it is very much evident that the NIFTY continues to remain trapped in a Descending Triangle formation. This formation has been characterized with falling tops and the bottoms remaining at 8690. In the given context, the level of 8690, which is the neckline, remains very critical support for the Markets. On the other hand, given the falling nature of the tops, in coming days 8800-8850 zones will pose very stiff resistance. It is further evident that in case the NIFTY breaches 8690 on the downside, we will see some more weakness creeping in. For the Descending Triangle to fail, it would be necessary that the NIFTY moves past 8850 levels. Until this happens, it will remain vulnerable to selling pressure from higher levels.

Overall, just like yesterday, today as well we keep our reading and conclusion on similar lines. NIFTY remains in the present potentially bearish formation of a descending triangle. Therefore, though we will continue to see stock specific purchases, it is advised that more cash levels should be maintained and all up moves should be continued to be used to protect profits at higher levels as intermittent bouts of profit taking at higher levels cannot be ruled out.