Thursday, December 15, 2011

Daily Market Trend Guide -- Thursday, December 15, 2011 (Published in the morning before the Markets opened)

MARKET TREND FOR TODAY                                                                    December 15, 2011
The second half of the session yesterday turned out to be disappointing again as the Markets gave up its intraday recovery to end the session yet again with losses. It ended the day at 4763.25, down by 37.35 points or 0.78% and in the process have still managed to form a higher top and higher bottom as shown in the chart below.

Today’s session is expected to be a critical session for the Markets. The Markets are expected to open weak once again are today expected to lend some stability if the technicals are to be believed as the opening is expected to be around its long term trend support in the range of 4700-4710, which is the red line drawn in the above chart. This level is expected to act as a critical support for the Markets.

Having said this, the NIFTY has lost 299.35 points or 6.03%  in last five sessions and with today’s weak opening expected, it would have lost around 350-odd points. Also, we would like to point out that the NIFTY has been constantly adding Open Interest since last three session which has resulted into creation of shorts in the system. This is evident from the fact that the NIFTY Premiums on the futures have reduced from 25-odd points 3-4 days back to almost at par (Zero) yesterday.

The RSI—Relative Strength Index on the Daily Chart is 39.8571 and is neutral as no negative divergence or failure swing is seen. The MACD is bearish as it is trading below its signal line.
There is no doubt that the negative sentiments, both domestic and external are weighing heavy on the Markets. But given the RSI at 39, and the negative opening around the support levels expected today and with having the Markets losing around 350-odd points straight, it is unlikely that the Markets will break the support line (the red line drawn on the Chart) easily without a technical pullback.

The weak opening today should be used to try and average any existing long position with a strict stoploss. There are bright chances that the Markets see a technical pullback which it saw a day before, and the only factor that can resist this is the RBI announcements tomorrow. Thus, caution is likely to prevail, but the trend is expected to be clearer after tomorrow, with a bias for a sharp technical pullback. Continuance of cautious approach is advised without any aggressive positions.

Wednesday, December 14, 2011

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,