Daily Market Trend Guide -- Tuesday, November 22, 2011 (Published in the morning before the Markets opened)

November  22,  2011 

MARKET TREND FOR TODAY

The Markets continued its total defiance to the technicals as it continued to move in a “structured” way and ended yet another session in red. The Markets opened continued to maintain its “daiy structured routine” as it opened on a gap down note of 50-odd points and then spent more than half of the session going nowhere and moved in just 18-odd points range until afternoon. After that, keeping with its intraday trajectory of past eight sessions, the Markets begin its downward journey as it went on to shed weight fast and ended the day at 4778.35, taking a deep cut of 127.45 points or 2.60%.

As seen on the above Daily Chart of NIFTY, the Markets have come down completely ignoring the 100-DMA and the 50-DMA which is completely unnatural and is against any established technical pattern as these two are important supports / resistances that the Markets usually recognizes under normal circumstances.  Having said this, the RSI—Relative Strength Index on the Daily Chart is 29.5980 and is in  OVERSOLD territory. Though it has reached its lowest value in last 14-days, it does not show any negative / bearish divergence. The Daily MACD continues to trade below its signal line.

Further, as seen in the Charts, the Markets now again rests as one of the most important support levels in form of 4780 levels with the filters until 4730 levels. It would be critically important for the Markets to take support at these levels.

For today, we may expect the Markets to open on a moderately positive note and continue to critically depend upon the intraday trajectory. Going strictly by technical observations, there are chances of a technical pullback to occur as the Markets now trades in OVERSOLD zone. The Markets have shed 511 points  or 10.08 in last eight sessions, and so, it sees a fair technical gap of technical pullback worth 160-odd points. It should be noted that this technical reading holds good only if the Markets are free of any artificial controlled movements.

Under such “controlled and structured” movements in the Markets, the retail investor bears the maximum burnt. No technical buy signal holds in such  conditions and upon shorting, there are big chances that he gets trapped in the heavy short covering which cannot be ruled out any time in such conditions.

We  continue to advise that it is best to avoid shorts at these levels as short covering at any time just cannot be ruled out. Fresh purchases may be made, but only selectively and partially. Overall, with expectation of a pullback, cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in
+91-98250-16331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com