Daily Market Trend Guide -- Friday, August 19, 2011

MARKET TREND FOR TODAY

The Markets had a terribly disappointing session as it once again succumbed to global weakness despite OVERSOLD technicals and ended the day with sizable losses thereby continuing to form a lower top and lower bottom on the Daily High Low Charts.

Today, the global cues and the domestic technicals present a very contradictory picture. The Markets are likely to see a gap down and weak opening again following ongoing global weakness but at the same time, as has happened in the past, the markets are also expected to offer some resilience to the weakness.

Initially, the Markets are likely to give a weak opening today following global weakness and is likely to trade weak in the initial trade. For today, the levels of 4890 and 4850 are likely to act as supports and the levels of 495 and 5060 are likely to act as resistance on the upper side.

At this juncture, we need to consider few important points. Amidst such continuing external factors causing weakness, it may continue to happen that the Markets defies the domestic technicals and continues to behave in contravention of the technical indicators. However, looking at technical indicators certainly help as it definitely poses resilience and pullback with slightest of the trigger.

The RSI—Relative Strength Index on the Daily Chart is 25.7112 and it shows no failure swing. However, NIFTY has set a new 14-period low whereas RSI has not and this is BULLISH DIVERGENCE. On the Candles, Engulfing Bearish Pattern has occureed and if this occurs during an downtrend which is the case with NIFTY, it may be a last engulfing bottom which indicates a BULLISH REVERSAL. Also, both Stocks and NIFTY Futures have reported heavy addition of Open Interest. All and all, having considered all this, it is advised to refrain from taking any fresh positions, especially shorts as the Markets are long overdue for a pullback which may be caused by short covering. It is best advised to sit through this weakness by maintaining liquidity and thus, a cautious outlook is advised for the day.

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