Wednesday, December 21, 2011

Daily Market Trend Guide -- Wednesday, December 21, 2011

DAILY MARKET TREND GUIDE                                               December 21, 2011

The Markets traded in line with the analysis carried out yesterday for the entire session, except that it suddenly fizzled out in the last 45 minutes of the trade to end yet another day of losses as it ended the day at 4544.20 down by 68.90 points or 1.49%. The Markets recovered some 50-odd points from its day’s low to trade flat but pared some 70-odd points from that levels to end the day with losses. In our yesterday’s edition, we had mentioned that given the technical indicators, the levels of 4555  would act as immediate support. That support held good until end of the session where it was temporarily broken. In the process, the Markets have formed a higher top and lower bottom as evident from the below chart. Thus, in the last nine sessions, NIFTY has shed 518.40 points or 10.70%.

Today, we can expect a long overdue pullback in the Markets. The European Markets have ended strong followed by strong consumer sentiment index in Germany and successful auction of Spanish bonds. The US too has rallied overnight and the Asian Markets are trading strong.

The Indian Markets too, which are nearly OVERSOLD and one of the worst performer among its peers is expected to give a gap up opening. It would be extremely important for the Markets to remain in positive rising trajectory post opening in order to capitalize on the positive opening. The levels of 4675 shall act as immediate resistance, the support (indicated with red line on the charts) which it broke. On the lower side, theoretically speaking, would be the levels of 4555.

The NIFTY added Open Interest yesterday, the OVERSOLD stock continued to get further OVERSOLD while adding Open Interest so the pullback that we would see would be imminent anyway, which would be supported by the buoyant global markets.

We refer our Monday’s edition of Daily Market Trend Guide wherein we had mentioned the Weekly Chart of the NIFTY and had mentioned that baring weakness for a day or two, the overall Week should not be that bad for the Markets and with today’s opening, we would neutralize this week losses, leaving the rest to the Markets to sustain. Also, as mentioned yesterday, even though the Markets continue to move further down, it has a potential for a sharp pullback, to the tune of 150-200 points, still remaining in overall downtrend and overall falling channel.

Thus, watching the intraday trajectory for the Markets which would be critically important, positive outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,

Tuesday, December 20, 2011

Daily Market Trend Guide -- Tuesday, December 20, 2011

MARKET TREND FOR TODAY                                              December 20, 2011

The Markets had an extremely volatile session yesterday as it remained in a 35-odd point range for the most part of the session, but swinged wildly in the either direction. However, the Markets did not lose beyond the opening losses as it resisted to weakness and saw some short covering towards the end to end the day at 4613.10, posting a loss of 35.50 Points or 0.83%. With this, the Markets have lost 449.50 points or 9.21% in last eight sessions. In this process, the Markets have formed a lower top and lower bottom on the Daily High Low charts.

As evident from the above chart, the NIFTY has broken down the support of 4692 and have formed a distinct lower top and lower bottom on the Daily High Low Charts. However, the overall analysis of the expected trend today would remain more or less with the analysis carried out for yesterday. That means, even if some weakness persists due to this weak pattern, it would be resisted by other technical factors.

Expect the Markets to open on a flat note and look for directions and the intraday trajectory that it forms would be critically important to decide the trend for today. The levels of 4692 and 4735 shall act as resistance and yesterday’s intraday low of 4555 shall act as immediate support followed by levels of 4530.The contradictory reading of the NIFTY Futures shedding Open Interest and the Stock futures adding big open interest continues with other technical indicators pointing towards  resistance to the downside.

The RSI—Relative Strength Index is 33.2573 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, A hammer occurred (a hammer has a long lower shadow and closes near the high).  Hammers must appear after a significant decline or when prices are oversold (which appears to be the case with NIFTY) to be valid.  When this occurs, it usually indicates the formation of a support level and is thus considered a bullish pattern.

Further, A hanging man occurred (a hanging man has a very long lower shadow and a small real body).  This pattern can be bullish or bearish, depending on the trend.  If it occurs during an uptrend it is called a hanging man line and signifies a reversal top.  If it occurs during a downtrend (which appears to be the case with NIFTY) it is called a bullish hammer.

Also long lower shadow occurred on Candles.  This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

With the RSI very near to its OVERSOLD zone and the candles showing a potential bottom formation for the short term, any weakness is likely to be resisted. The NIFTY PCR is 0.91.

Overall, yesterday’s outlook for the Markets is reiterated and it is advised to continue to maintain liquidity  while avoiding aggressive positions on either side, especially on the short side. With the Markets losing almost 10% straight, there are chances of a pullback, or at least resistance on the downside even while remaining in the overall falling channel. Caution with mild optimism is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,

Monday, December 19, 2011

Daily Market Trend Guide -- Monday, December 19, 2011

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,