Daily Market Trend Guide -- Monday, October 10, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY

The Markets had an expected rally on Friday on back of favorable technicals and supported by positive global markets and ended the day with strong gains, and in the process formed a sharply higher top and higher bottom on the Daily High Low charts.

As mentioned in our previous editions of Daily Market Trend Guide, the Markets have been trading in a very broad rectangle, i.e. trading range of 4720-5170 and there had been no structural breach on the Charts and as a result, the rally was expected.

However, post this rally, the Markets still continue to remain in a trading range. For today, expect the Markets to open on a moderately positive note and look for directions. The Markets are likely to open on a positive note and continue with its up move at least in the initial session. For today, the levels of  4930 and 4970 shall act as resistance and the levels of 4850 and 4810 are likely to act as supports.

All lead indicators continue to remain in place. The RSI—Relative Strength Index on the Daily Chart is 45.5940 and is neutral as it shows no negative divergence or failure swing. The Daily MACD continues to trade above its signal line and is therefore bullish.

On the Weekly Chart, RSI is neutral at 37.4505 as it does not show any negative divergence or failure swing. The Weekly MACD still trades below its signal line. On the Candles Weekly Chart,  A long lower shadow occurred which is usually potentially bullish under similar chart conditions. Further, the Markets have not shed but added nominal Open Interest in futures. It can be fairly observed that from Friday’s rally, there had been no net short covering which usually results in shedding of OI, but fresh longs have been created.

All and all, the  Markets are likely to open positive, and trade positive at least in the initial trade. While protecting profits on initial positions, very selective fresh purchases may be made, while avoiding shorts. Volatility may remain. Overall, positive outlook is advised for today.

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