Friday, November 25, 2011

Daily Market Trend Guide -- Friday, November 25, 2011 (Published in the morning before the Markets opened)


The Markets yesterday saw a much awaited and long overdue technical pullback as it ended the day with modest gains. The Markets opened weak yesterday and after touching the low of 4639.10, rose over 130-odd points from they days low to end the day at 4756.15, posting a decent gain of 50 points or 1.06%. In the process, the Markets have formed a parallel bar with similar top and bottom on the Daily High Low Charts.

For today, expect a subdued opening in the Markets and today’s session would be critical for the Markets to decide the trend for coming weeks. Today, expect the Markets to open on a subdued note with the levels of 4780 and 4845 acting as resistance levels and the levels of 4720 and 4680 acting a crucial support levels. The RSI—Relative Strength Index on the Daily Charts is 32.8289 and it has crossed above its OVERSOLD formation which is Bullish. It does not show any negative divergence or failure swing. The Daily MACD continues to remain bearish as it trades below its signal line. On the Candles, A While Body occurred as the prices closed quite higher than they opened. 

Today’s trend would continue to critically depend on the behaviour of the Markets vis-à-vis the levels of 4780. The 4780 levels continue to remain a critical support before 4720 levels (which is currently likely to act as resistance until markets moves past the levels of 4780). It would be imperative for the Markets to move past this levels as soon as it can so that it can re-enter the broad trading range of 4720-5170 it traded in for almost two months. Until it moves past 4780 levels, it may accumulate with slight downward risk with the levels of 4720-4680 acting as supports.

All and all, the volumes have been good and there continues to be large rollovers of short positions yesterday and there are chances that we may see the Markets move past this level of 4780. For this, maintenance of levels of above 4720 would be critical. There are chances that after a subdued opening we may see the trend improving as the session progresses. However, a dip below 4720 will infuse some weakness in the Markets. While stock specific purchases may be seen, cautious approach is continued to be advised for the day.

Milan Vaishnav,
Consulting Technical Analyst,

Thursday, November 24, 2011

Daily Market Trend Guide -- Thursday, November 24, 2011

MARKET TREND FOR TODAY                                                  November 24, 2011

The Markets saw a similar intraday trend that it has been seeing in last couple of sessions. It opened down, remained sideways doing nothing until mid session, and  then saw a huge selling pressure in the second half, recovered a bit and finally ended the day at 4706.05, posting a deep cut of 105.90 points or 2.20%. The Markets saw huge volumes yesterday of over Rs. 2.50 lakh Crores and formed a sharply lower top and lower bottom on the Daily High Low Charts.

For today, expect the Markets to open weak again following weak global cues. As seen in the above chart, the Markets have  breached the levels of 4770-4780, (the black support line) and also breached the support levels of 4720, the lows from which it bounced back for three times, (just below the black support line).

For today, the support exists for the Markets near 4692 and 4640 levels. Today we have some contradictory reading. The Markets, technically speaking have broken the important trend and support levels and thus, have given a sell signal. 

However, having said that, on the Daily Charts, the Markets have moved again into the OVERSOLD territory. The RSI—Relative Strength Index is 28.5091 and it has reached its lowest value in the last 14-days. It does not show any negative divergence or failure swings. However, it now trades in OVERSOLD territory. The Daily MACD continues to remain bearish trading below its signal line. 

Apart from the above reading, the NIFTY has first time reported net addition in total Open Interest in NIFTY Futures. Also, the PCR has fallen to 0.86 (sharply from 0.96) which is near bottoming out levels.

However, technical factors / readings have been defied by the Markets which are under severe FII lead pressure and the NIFTY has seen decline of 582.90 points or 11.57% in last 10 sessions without acknowledging any legitimate technical supports. Again, on the other side, the CoC (Cost-of-Carry) continues to decline across stocks which indicates heavy built up of short positions in the system.

Having said all this, there is clear contradiction in technical reading, F&O Statistics and what is actually happening in the Markets, which is a clear indication that the Markets are under artificial pressure lead by few FIIs without any major retain participation. Today is the expiry day and we will continue to see the volatility remain in the Markets and the session weighed down by rollover centric activities.
Again, technically speaking, the Markets are OVERSOLD and a technical pullback is OVERDUE, if not in the morning, then later or after expiry of this current series. Highly cautious approach while avoiding aggressive positions is advised for today.

Wednesday, November 23, 2011

Daily Market Trend Guide -- Wednesday, November 23, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY                                                   Wednesday, November 23, 2011

Even though the Markets were oversold, the yesterday’s session remained much volatile as global cues weighed more and the Markets moved in very volatile range showing lack of conviction and finally ended the day at 4812.35, up by just 34 points or  0.71% and in the process formed a lower top but higher bottom on the Daily High Low Charts.

For today, again expect the Markets to open on a lower note and look for directions. In case of lower opening, it would be critically important for the Markets to trade above 4775-4780 levels, and in worse case do not breach the 4720 levels which is the very critical filter support of the triple bottom support of 4770-4780 levels.

For today, the levels of 4770 and 4720 shall act as supports and the levels of 4855 and 4890 shall act as resistance on the higher side. The RSI—Relative Strength Index on the Daily Chart is 32.6370 and it has just moved out of the Oversold territory which is Bullish. It is neutral as it shows no failure swings or negative divergence. The Daily MACD continues to trade below its signal line.

It is important to note that today is the penultimate day of the expiry of the current derivative series and thus, the session is also likely to remain dominated with rollover centric activities. Further important to note that cost of carry for December contracts as fallen, widening the discount or decreasing the premium which very clearly signifies that lots of shorts are being rolled over into the next month. Further, any weakness on the Close charts will again make the Markets OVERSOLD. Thus, it is very strong likelihood that we may see a spate of short covering again at lower levels. 

This is  clearly a market not to sell. The investors are advised to utilize this opportunity to make very selective purchases. The shorts should be strictly avoided as short covering may not be ruled out due to reasons enumerated above. The volatility is likely to stay, due to both global factors as well as ongoing rollovers. However, shorts may be avoided. The intraday trajectory would continue to remain important. Overall, faintly positive but cautious outlook is advised for the day.

Tuesday, November 22, 2011

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

November  22,  2011 


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,