Daily Market Trend Guide -- Wednesday, December 14, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY                                                        December 14, 2011

The Markets had a volatile session yesterday wherein it saw sharp intraday movements but saw equally sharp short covering in the last 45 minutes of the trade as it snapped its 3-day losing streak to end the day with modest gains. The Markets on a modestly negative not but after briefly trading into red, it managed to move into positive territory. However, as categorically mentioned in our yesterday’s edition, the levels of 4780, continued to pose as resistance for the major part of the session. The Markets then pared all of its gains to give the day’s low of4728.50. But again, as mentioned in our yesterday’s edition, the Markets saw equally sharp short covering in the last 45-minutes of the trade as it recovered some 95-odd points from its lows to give day’s high of 4824.70. It finally ended the day at 4800.60, posting a rise of 36 points or 0.76%, but still formed a lower top and lower bottom on the Daily High Low Charts.

Today’s analysis remains more or less same and similar like that of yesterday. For today, expect the Markets to open moderately lower and look for directions and the intraday trajectory would continue to remain extremely critical to decide today’s trend. The Markets are expected to open lower than 4780, thus, the levels of 4780 and 4855 shall act as resistance and the levels of 4720 and 4680 are technical supports on the Charts.  Though the Markets ended the day near the high point of the day and technically it should continue with the up move, but global volatility will weigh in and is all likely to set a modestly lower opening.

 

The lead indicators are showing little weakness today. RSI—Relative Strength Index on the Daily Chart is 41.6017 and is neutral as it shows no negative divergence or failure swings. The MACD on the Daily Chart has reported a negative cross over as it now trades below its signal line. This is a little weakness on the charts.

Having said this, the contradictory reading continues. The NIFTY Futures have indicated decrease in Open Interest by around 3%, but on the other hand, majority of the NIFTY Components have shown addition in Open Interest. This shows that while shorts were covered in NIFTY Futures, some longs have been selectively added in the Stock Futures. However, NIFTY short covering will have to be replaced with longs for the recovery that we saw yesterday to continue.

In the given uncertain and contradictory reading, we would like to repeat our advice of refraining in taking aggressive positions on either side, which maintaining enough liquidity to hold on to existing positions. The Markets are likely to continue to remain volatile and such sharp technical pullbacks cannot be ruled out. Continuance of cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
www.MyMoneyPlant.co.in    
http://milan-vaishnav.blogspot.com
+91-98250-16331
milanvaishnav@mymoneyplant.co.in
milanvaishnav@yahoo.com