Daily Market Trend Guide -- Tuesday, June 21, 2011

MARKET TREND FOR TODAY

The Markets gave a terrible and extremely volatile reaction to the news of renegotiations of DTAA Agreement between India and Mauritius, a place which originates 40% of our FDI. The Markets reacted terribly to the one-off statement and plunged within seconds to its 4 month low and ended with 2% losses and in the process have given a sharp lower top and lower bottom on the Daily High Low Charts.

As we have done on last couple of occasions, in time of chaos and panic, we would, as always, endeavor to present correct picture.

For today, expect some respite from the severe weakness that we saw as the Markets are likely to trade in a narrow range today and attempt a technical pull back. During such times, it is UTMOST NECESSARY to keep our head in place when others are losing theirs and need to analyze few important points.

First, the Markets have got OVERSOLD. The RSI— Relative Strength Index on the Daily Chart is 29.3854. Though it has reached its lowest value in last 12-days, it is now in OVERSOLD range.  Secondly, the Markets are at their Double Bottom support and the low that we saw yesterday is a major support, thus indicating a very limited downside, especially from such OVERSOLD levels. Thirdly, Markets have relentlessly added Open Interest in NIFTY Futures wiping out the premium and converting it in discount indicating significant creation of short positions. Lastly, the DTAA issues is not a new one, and as very categorically clarified by the MoF, the imposition of capital gains tax is NOT part of the renegotiation agenda.

Having said all this, it is utmost important to not to panic and lost patience. It is very strongly advised to maintain liquidity and hang on to open positions. In fact these levels should be used to make selective purchases. A day here or there, Markets are poised to see, at least a technical pullback. Positive caution is advised for today.

  

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in
+91-9825016331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com