MARKET TREND FOR TODAY December 19, 2011
The Markets took an totally unexpected turn on Friday in the last hour and half of trade as it came off over 150-off points from its day’s low as it reported a low of 4628.20, and ended the day at 4651.60 posting a net loss of 94.75 points or 2 % taking it to 52-week low as well as close. The Markets was expected to react to the RBI Rate announcements and it kept the key rates expectedly unchanged, but the same remained a non-event on Friday. In the process the Markets have formed a higher top and higher bottom on the Daily High Low Chart. With this the Markets have ended the Week with net loss of 215.10 points or 4.47%. In last seven sessions, the Markets have lost 411 points or 8.38%.
Yesterday’s fall came in absolutely unexpected as the RBI expectedly did not raise rates, the Rupee recovered from the all time lows, the advance tax numbers of the leading companies are not bad at all, the crude price has come down, and thus the Markets had no apparent reason for a foul cry. The Macro Economic Concerns are definitely there, but then the valuation of the Markets stands discounted at these levels with the PE earnings of 11-11.5 times of 2013 forward earnings.
It is important to note that this fall in the last hour of the trade is attributed to one Big Operator on behalf of two to three FIIs who went on a short selling spree to the extent of 250-300 Crores each. The amount is not big enough that could warrant such a fall, but the absence of buying on the other hand and total lack of depth led to the gravity of it. This was further fueled by margin calls of 5-leading brokers in the last hour of the trade leading to this quantum of the fall. It is further important to note that the NIFTY and the Stock futures have reported net addition of Open Interest across the board.
Again, while taking the note of the above mentioned fact, the NIFTY has broken its all important support levels of 4630-4650 and has turned bearish on charts. Also, with the lead indicators are yet to get OVERSOLD and thus has got a fair chance of weakness continuing. However, some indicators on the Daily and Weekly Chart shows that the Markets still has some chance of preventing itself from giving a negative breakdown on the charts and has a chance of a technical pullback, even though it continues to keep itself in the current downward trajectory.
For today, the levels of 4735 and 4795 shall act as resistance the levels of 4605 and 4570 shall act as supports. The RSI—Relative Strength Index on the Daily Chart is 34.8459 and it has reached its lowest value in last 14-days which is bearish. The Daily MACD continues to trade below its signal line. However, on the Candles, An Engulfing Bearish Pattern has occurred. When this occurs during a downtrend, which is clearly the case with NIFTY, it may be a Last Engulfing Pattern which indicates a BULLISH REVERSAL. This needs a confirmation today.
Further on the Weekly Charts, the RSI is 39.0259. The NIFTY has set a new 14-week low but the RSI has not. This is a BULLISH DIVERGENCE.
The bottom line is that even if the weakness persists for a day or two, the Markets STILL HAS a chance of sharp pullback, even though it continues to keep itself in the falling channel. It is advised to use this as a opportunity of making selective purchases and in even of weakness, aggressive shorts should be avoided as any further weakness shall take the Markets towards getting oversold. Overall, a very selective and light stance / participation in the Markets is advised while maintaining liquidity. A cautious approach with mild optimism is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.