Monday, April 4, 2011

Daily Market Analysis -- Follow Up

Daily Market Analysis -- Follow up

The Markets today, after showing some initial signs of weariness in the early morning, continued its relentless up move defying all factorts, chart patterns as well as technicals to closed again with robust gains.

At this juncture, we would lile to point out that the rally that we have been seeing is purely liquidity driven and any such rally, or a rise of as much as 650 points NIFTY or around 2300 points of Senxes, without any correction practically, is certainly has all the potential to turn into a nightmare for retail / smaller investors.

When FIIs start selling, they usually defy all technicals. Same is the case with when they continue to buy driven by liquidity. In present case, we have been seeing Markets rise defying all Chart Pattern and all technical readings on the Charts. This is enough proof that once this buying stops, there are all chances that the small / retail investor who might have made purchases after feeling little left out may get trapped at higher levels.

Analysing the present scenario, the Markets have given a sharp higher top and higher bottom after giving a Spinning Top Formation on the Candles, which on the contrary signals a potential reversal from the top or a top formation.

At this juncture, one must not fail to read certain facts. First, with this, the Markets have touched the falling trend line which is drawn from the 6335.90 levels joining the levels of 6181.45. So, the Markets have Closed near a Pattern Resistance. Secondly, even with this relentless rise, the 100 DMA of the Markets has continued to decline and is now all set to cut 200 DMA from above giving a negative crossover. The falling of 100 DMA inspite of such rise in the Markets is yet another sign of an unnatural rally. Thirdly, with today's Close, the RSI on the Daily Chart has become OVERBOUGHT as it is now in overbought territory.

Given the above reading, much would depend upon the Markets opening above its resistance levels of 5925 an sustaining above that levels. BUT, under any case, any further upmove has become completely unhealthy and unsustainable. We would like to clearly advise against taking any fresh long positions until the Charts are in shape and the Markets see some consolidation / correction from these levels.

These Markets levels, especially when the rise having come in this manner, we see our duty to paint a correct technical picture as this rise is neither support with Chart Pattern Analysis, nor any other technical factors. We see this our duty to paint a correct picture of the Markets in larger interest of retail investors, who are most likely to get carried away into further longs seeing such rise.

On the contrary, the  best strategy in such Markets which are seeing unnatural fuelling would be  to keep away from taking any direct NIFTY long positions but rather concentrate on stock specific opportunities.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in
+91-9825016331

milanvaishnav@mymoneyplant.co.in 
milanvaishnav@yahoo.com

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