Daily Market Trend Guide -- Thursday, October 20, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY

The Markets had a strong session yesterday as it opened on a positive note and went on to remain in upward rising trajectory to finally end the day with decent gains and in the process formed a sharply higher top and higher bottom on the Daily High Low charts.

For today, expect the Markets to open again on a moderately lower note and look for directions and since it is expected to open subdued, the intraday trajectory that it forms after opening would be critically important. For today, expect the Markets to open on a subdued note and in the process, the levels of 5110 and 5075 are expected to act as supports on the lower side.

The Markets have continued to trade within the broad trading range it has been trading in since August and thus, likely to remain so for couple of sessions.

The RSI—Relative Strength Index on the Daily Chart is 56.9107 and it does not show any failure swing. However, NIFTY has set a new 14-day high but RSI has not and this is Bearish Divergence. The Daily MACD continues to remain bullish as it trades above its signal line. On the Candles, A Rising Window occurred. This usually implies continuation of bullish trend it makes the pattern more bullish.

Having said this, there are two important things to note. Yesterday’s rise has come more out of short covering as NIFTY Futures have reported shedding of open interest with the rise and secondly, the Markets are yet to  move past the levels of 5170 which is required to break out of the broad trading range it has been trading in. As mentioned number of times in the past issues of Daily Market Trend Guide, the Markets need to move past the levels of 5170 for fresh and sustainable up move. So, until this happens, we are likely to see some consolidation again. It is necessary that the short covering is replaced by fresh longs. While avoiding shorts, stock specific approach is advised as the Markets are expected  to remain range bound with some volatility. Positive caution is advised for today.

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