The Markets saw a spate of short covering yesterday, especially in the second half of the session as it recovered from its day’s low to end the day with decent gains and in the process have formed a higher top and a slightly higher bottom on the Daily High Low Charts.
Today, we will see the Markets opening on a positive note on back of strong closing of the US Markets but at the same time, the technicals too are expected to take over.
With the Markets expected to open on a positive note following strong closing of the US Markets, the technicals are expected to take over and there are bright chances that the Markets transforms itself into falling trajectory post positive opening. For today, the levels of 5650 and 5670 are expected to act as resistance and the levels of 5580 and 5540 are expected to act as supports.
The RSI—Relative Strength Index on the Daily Chart is 54.7641 and it shows no negative divergence or failure swings and is therefore neutral.
The Daily MACD however continues to remain bearish as it trades below its signal line.
Having said this, it is important to note that the Markets in the two previous session, especially yesterday have shed Open Interest with the rise and this is a very clear indication that there has been short covering in the Markets instead of any fresh longs. Also important to note that any positive opening today will cause the Markets to open near a very important pattern resistance of falling trend line. Thus, even with positive opening today, there are bright chances that the Markets pares its early morning gains as the session progresses.
All and all, it is advised not to get carried away with any seemingly strong opening as the trend would reverse only above 5700-5750 levels. Even with the positive opening, it is advised to remain ultra selective in taking longs and continue to protect profits at higher levels.
Overall, a cautious and stock specific approach is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in
+91-9825016331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com
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