Daily Market Trend Guide -- Monday, August 22, 2011

MARKET TREND FOR TODAY

The Markets, despite being Oversold, continued to drift lower on Friday, getting further OVERSOLD, ended the day down. Though, while doing so, it has attempted to find a bottom but still have given higher top and higher bottom on the Daily High Low Charts.

Today, we are likely to see some respite from the relentless weakness that we have been seeing and can see the Markets stabilizing in the short term, as the Technicals strongly suggest.

Today, expect the Markets to open on a flat to mildly positive note and look for directions, though it shall continue to depend heavily on the intraday trajectory and the levels of participation in the Markets. Though, as said earlier, technicals certainly point towards possible bottoming out of the Markets in the immediate short term. For today, the levels of 4890 and 4975 are the immediate resistances and the levels of 4810 and 4790 are likely to act as supports.

The RSI—Relative Strength Index on Daily Chart is 22.3259 and is deep into OVERSOLD Zone and does not show any negative Divergence. The Daily MACD continues to trade below its signal line.

On the Weekly Charts, the RSI is 29.7594 and this too has got OVERSOLD on Weekly note and it shows no negative divergence. The Weekly MACD trades below its signal line.

On Daily Charts, the Markets have attempted to find bottom around 4800-4790 levels which is a long term support in form of  Double Bottom drawn from May 2010 levels. Also, on Weekly Charts, the Markets have taken a support at same levels which is also a 200-DMA Weekly Support. Further to this, the Markets have seen short covering from the potential bottom levels of 4796 and FIIs and DIIs have remained net buyers.

In order to confirm short term bottoming, we need to see these shorts being replaced by fresh longs. In case of continuing weakness, it is very strongly advised to avoid shorts and make selective purchases. Cautious optimism is advised.

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