Gemstone Equity Research & Advisory Services

Saturday, March 4, 2017

MARKET TREND FOR FRIDAY, MARCH 03, 2017

MARKET TREND FOR FRIDAY, MARCH 03, 2017

Indian Equity Markets did everything that it could do in yesterday’s session. Following a strong global equity setup, the benchmark NIFTY50 opened higher and advanced towards 9000-mark while forming 8992.50 as its intraday high. However, as we had mentioned categorically in our Thursday’s note, NIFTY witnessed a very volatile and sharp corrective action and lost over 100-odd points from the high point of the day before ending with net loss of 46.05 points or 0.51%. As it was very much expected, the NIFTY has confirmed the Double Top resistance zones of 8930-8950 levels and for the immediate short term, it has marked these levels as its intermediate top. Today, we expect a subdued start to the Markets and we might continue to see NIFTY consolidation in capped range with downward bias. However, the buy-on-dips structure of the Markets has not been altered.

For today, the levels of 8940 and 8990 shall act as immediate resistance levels. Supports will come in at 8835 and 8780 levels.

The Relative Strength Index – RSI on the Daily Charts is 64.6622 and it has just moved below from a topping formation. Apart from this, it remains neutral showing no bullish or bearish divergence or any failure swings. The Daily MACD stays bearish as it trades below its signal line. On Candles, a Bearish Engulfing line has occurred. If read in the present context, this has occurred after a significant up move and therefore, it has marked an intermediate top. However, this requires confirmation but the present candle is long enough to at least halt the present up move.

The NIFTY March futures have shed over 3.36 lakh shares or 1.50% in Open Interest. This shows some minor profit taking from higher levels but this figures is not large enough to signal any notable shift in the sentiment of the market participants.

While having a look at pattern analysis, it can be clearly be concluded that NIFTY has, as of now, confirmed the Double Top resistance zone of 8930-8950 and has marked these levels as an intermediate top. For a sustainable up move to occur, NIFTY will have to move past these levels. Until this happens, we will continue to see the NIFTY trapped in corrective activities and range bound consolidation.

All and all, while a subdued activity is expected in the initial trade, we advice to refrain from attempting to short the Markets as corrective activities tend to remain shallow in a strong market. However, with an intermediate top being marked, aggressive exposures should be avoided and cash levels should be kept higher than normal. Dips may be continued to be utilized to make selective purchases but sector rotation too needs to be closely monitored. While keeping overall exposures moderate, cautious view on the Markets is advised for today.

Milan Vaishnav, CMT

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

MARKET TREND FOR THURSDAY,MARCH 02, 2017

MARKET TREND FOR THURSDAY,MARCH 02, 2017

Fuelled by stronger than expected GDP data which belied the expected adverse effects of demonetization, the Markets saw some upsurge as the NIFTY ended the day gaining 66.20 points or 0.75%. This was further aided by very buoyant global equity set up. Here, at this juncture, there are some important factors that one needs to take care of. There is no doubt that liquidity is severely chasing the Markets but with the end of the yesterday’s session, the NIFTY has halted precisely near the Double Top resistance of 8940-8950 zones. We had mentioned these levels in our yesterday’s note and the Markets have halted their up-move very near to these levels. However, today, we might see a positive opening and Markets may trade positive in the initial session and even test 8970-9000 mark but situation might warrant deep attention towards Close. Possibility of the Markets paring gains, if at all there are any, towards the end may not be ruled out. It would be wise not to give a frenzied chase to the Markets until it consolidates a bit given the slightly overbought nature of the Markets.

For today, the levels of 8990 and 9025 will act as immediate resistance levels for the Markets. The supports come in much lower at 8865 and 8810.

The Relative Strength Index – RSI on the Daily Chart is 70.6383 and it trades slightly overbought. The NIFTY has set a fresh 14-period high whereas the RSI has not yet and this has resulted into a Bearish Divergence on this oscillator. The Daily MACD still continues to remain bearish while trading below its signal line.

On the derivative front, the NIFTY March futures have massive 11.44 lakh shares or 5.37% in Open Interest. This indicates very strong undercurrent in the Markets.

The pattern analysis shows that the NIFTY has ended at its Double Top pattern resistance at Close levels. Though it still rules its immediate highs and upward moves cannot be ruled out, these levels at Close needs to be critically monitored. We will continue to see the up surge in the Markets given the frenzied chase by liquidity but that will make the Markets vulnerable to profit taking bouts from higher levels. Though we do not rule out continued surge in the Markets, every up move will make NIFTY vulnerable to profit taking bouts as the NIFTY seems overextended at present.

Overall, we reiterate that the undercurrent remains extremely buoyant and we expect the NIFTY to extend its gains, at least in the initial session. However, having said that, as the Markets once again approaches the 9000-mark, the protection of profits at those levels will remain immensely important. We recommend highly vigilant protection of profits at higher levels while dips may be continued to be used for making highly selective stocks specific purchases.